Smart order router
Software that splits and sends orders across trading venues, lit and dark, to wherever the best available price and liquidity are at that moment. Needed because liquidity is fragmented across many venues.
Where you will meet it
Smart order router appears in 2 learning outcomes on the CFA syllabus. A few of them:
- Explain what market fragmentation is and why it matters
“Traders therefore rely on smart order routers and algorithms to search venues and to split orders, and regulators rely on consolidated data and best execution rules to link markets.”
- Explain what electronic trading systems look like and what they are used for
“Order management and execution management systems handle orders and routing, smart order routers send orders to the venues with the best prices, and trading algorithms slice parent orders into child orders to follow schedules such as VWAP or implementation shortfall.”
See also
Practise it
Practise smart order router until it is automatic: questions that explain every wrong option.
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