Active traders clamoring to see all stock liquidity beyond the best bid and offer could push retail brokerage firms to deliver depth-of-book order feeds on their trading platforms. For example, in November, Scottrade, the St. Louis-based online discount brokerage, began offering Nasdaq's TotalView - the exchange's full depth-of-book order book data to customers who use ScottradeELITE, an advanced platform for active traders.
TotalView shows all the orders in Nasdaq MarketCenter (formerly SuperMontage) as well as Brut ECN. "We worked very hard to listen to what our Scottrade ELITE traders want," says Kevin Dodson, manager of online trading platforms at Scottrade. "One thing we're hearing in the last six months is greater market depth - they want greater visibility into the market." Dodson notes that customers must have a $25,000 balance to qualify to use the ELITE online trading platform, which is free to use.
Based on that customer feedback, Scottrade partnered with Nasdaq to gain first-mover advantage on TotalView, Dodson says. Scottrade gets the feed directly from Nasdaq in its data center and distributes it out to the ELITE traders using the Windows-based platform.
While Nasdaq Level II data is the standard that most firms in the retail brokerage sector display to investors, it only shows the best bid and ask for each market maker. "It doesn't give you a clear picture of what's going on," says Dodson. "With TotalView, you get every bid and ask. If there is hidden liquidity and quantity sitting behind, for instance, Merrill Lynch's best bid and offer, you've never seen that in Level II."
For $15 a month, Scottrade ELITE traders will get TotalView and Nasdaq Level II, according to Dodson. If they make 10 trades per month, they get Level II data for free; if they make 15 trades per month, TotalView is free as well, he adds.
"Our customers see a more transparent market, allowing them to make better trading decisions," asserts Dodson. However, Scottrade is not a direct-access broker; it doesn't offer the functionality for traders to route orders to the market. Instead, the orders are sent to its trading desk, which monitors the various market centers and evaluates the execution quality.
According to Bill O'Brien, SVP, Nasdaq market data distribution, Scottrade is the first mass-market retail broker to take Nasdaq's full depth-of-book data feed product. Charles Schwab makes TotalView available on its CyberTrader DMA platform for its most active traders, while E*Trade hasn't done so yet, he adds. "It's certainly reflective of a trend that serious traders really need full depth-of-book information," says O'Brien.
Though TotalView has been around for three years - since the launch of Supermontage (a.k.a, Nasdaq Market Center), Nasdaq's electronic matching engine - a lot of traders have been trading on Nasdaq using the partial depth-of-book information, relates O'Brien. Over the past 18 months, however, the content gap between TotalView and the legacy product Level II has gotten wider, he notes. "Within five cents of the inside market, TotalView shows twice as much liquidity available for execution compared to Level II," O'Brien says.
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Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio