Your Home Improvement Guide

Electronic order routing systems are used by brokerages and floor traders to transmit orders rather than the old stock market system of hand raising. Order routing systems are fast catching on and overtaking other means of transmitting orders. These systems are preferred because they operate much easier and faster and are cheaper than other systems, and are also subject to all the rules and regulations of the exchange market.

A major problem with electronic order routing systems is that they are usually quite costly to build and they are quickly replacing all other systems; especially among the chief markets, brokerages and dealers. Even though these systems are taking over they can be restrictive because they can only handle those orders that they are pre-programmed for; if traders need to add special instructions along with the order then they have to use the telephone. Traders may also need the telephone prior to submitting their orders to talk about the state of the market to their brokers or to mention certain features of the deal.

Not all electronic order routing systems are the same. You need to be well aware of opening and closing systems, error trade policies and prices. You should always consult the rules of the exchange offering the electronic routing system because these things can vary quite widely. You also need to know about qualifications for access and the limitations that might be imposed on the type of orders that can be processed through the system. You also need to know the grounds for termination because each of these factors has implications for the security of the system.

Different routing systems may hold different risks for example with system access, differences in response times and security. If you are using an internet based electronic order routing system then this has further security implications because in some cases hackers can access the tables and interfere with the routing of the order. There are also risks relating to service providers and how they monitor email systems.

Most of the exchanges that offer electronic ordering systems and electronic trader systems have already calculated in the risk factors and allowed for their liability. Most exchanges will do everything they can to limit risk in their electronic trading and order routing systems because it is in their best interests to do so. In spite of their efforts to reduce risk, most exchanges will have regulations to limit their liability, the liability of software and communications sellers. Exchanges also have regulations regarding the amount you can claim in damages if there are delays or system failures. You should read the regulations carefully and bear in mind that liability limitations differ and depend on the exchange that is offering the system. In your own best interests try and consult the rules on limitations of liability for a number of exchanges. You should be able to access exchange rules from the industry professionals that hold your account, or search the net because some exchanges publish their limitations on their home page. At the end of the day you want to choose an exchange that poses the least risk to yourself and your business.