Scottrade Courts Active Traders with Nasdaq Pre-Trade Data Tool

In the highly competitive active trader market, online brokers are continuously under pressure to roll out more in-depth market data tools once only available to sell-side brokers. Last month, Scottrade became the first brokerage firm to offer its customers Nasdaq Velocity and Forces, a real-time market data product that measures pre-trade order activity in Nasdaq, NYSE and Amex "listed securities.

"It's based on the actual orders coming in," explains Todd Slawson manager of active trader services at St. Louis-based Scottrade. Whereas a Level market data feed measures top of books from market makers, Velocity and Forces is measuring the total order flow for a security at a particular time, as compared to an historical average of normal order activity at that moment in time, says Slawson. However, the data on NYSE and Amex securities is derived from quoting and trading activity on the Nasdaq Stock Market.

Scottrade is making the high-end market data tool available for free to all customers who use ScottradeELITE, the firm's advanced platform for active traders. To qualify for using ScottradeELITE, customers need $25,000 minimum in assets, but there are not trading requirements.

When it announced the product in June, Scottrade showed the Market Forces to active traders who attended Trader's Expo, a national trade show and its own user summit. Slawson says there's a lot of interest in the product. "Measuring that order flow allows them to base trading decisions on momentum. They're able to see increasing momentum and emerging trends based on the order flow," he says. This is different than measuring against time- and-sales data "where you're seeing orders that are coming across and already executed. Now you're seeing them (orders) before they're executed," emphasizes Slawson. The advantage is perhaps the trader is able to get ahead of other orders, he suggests.

ScottradeElite is a Windows-based platform. Customers would click on the tool and it would immediately open up in the platform. "It's a very visual tool that resembles a dashboard," he says. There are two speedometers that allow someone to instantly read what the Force and velocity is," he says. Windows can be linked, so that Market Forces and Velocity can be linked to an order-entry screen with the symbol already filled in. This way a trader could react quickly to the information and make faster trading decisions.

"What Nasdaq has done is enable you to see the entire order flow coming into a security," says Slawson. Scottrade doesn't have an exclusive on the Nasdaq product.

Slawson believes his firm is the first to offer this tool to the online retail market. In the past, major full-service brokerage firms that were able to measure their own internal order flow could calculate the direction of buy and sell-orders themselves, but this was not made available to retail traders, indicates Slawson. Three years ago, Scottrade was the first brokerage to offer Nasdaq TotalView, a complete depth-of-book market data feed. E*Trade now offers TotalView to its active traders as well.

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