With rising technology, the stock market has become a complex algorithm. A smart order router eases the process of investing by assessing trading liquidity. It has its own set of rules that it follows stringently to execute the trade.
Earlier equity markets relied heavily on this technology, but seeing its advantages other trading platforms also adopted it. With the growing popularity of online trading, SOR has become more than a necessity. Even the banks and brokers are not far from adopting it.
The increased number of trading venues has fragmented the liquidity and the scripts are traded across different platforms and at a different price. The Smart Order router helps to battle against the process of fragmentation by analyzing and placing the order on the best possible option.
Advantages of Smart Order Routing
Most institutional investors and brokers use this technology to find the best possible price to trade. Each smart order will be set up as per the requirements of the order and the conditions mentioned by the institutions and regulatory bodies. Through this technology, you will get the possible chance of discovering the price. SOR means that the trading platforms adhere to the best parameters including the cost and performance to achieve the results.
Cons of using SOR
As technology is updating itself at a rapid pace, it is believed that SOR will develop enormously, and the old technology will become redundant. Though we know SOR helps to manage the fluctuation in the market, as the market gets more complex, the SOR needs to become faster and smarter.
In the end, it is quite easy to see that SOR is a relevant tool and it helps the investor to discover the best price to execute the order. When the investor places the order, the SOR will automatically compare the stock price across different exchanges and you will get to know the price instantly.