Smart Order Routing

Smart order routing is the automated logic that decides where each order, or each part of an order, is sent for execution. A router reads the prices streamed by connected liquidity providers and venues, then chooses among them using rules such as best available price, expected fill probability, historic rejection rates and latency. Large orders may be split so that several providers each fill a slice. Routing behaviour affects the outcome a client actually receives: two brokers pulling prices from the same providers can deliver different fills depending on how their routers rank, size and time orders. Execution policies normally describe, in general terms, the factors a firm weighs when routing and how it monitors the results.