Most NASDAQ trades are executed over the NASDAQ workstation using one of its automated execution systems. These systems allow dealers to execute orders without having to speak with one another on the phone.
NASDAQ Market Center Execution System / NMCES
The NASDAQ Market Center Execution System also known as NMCES accepts market orders and immediately executable limit orders for both customer and firm accounts. Orders may be entered for up to 999,999 shares per order. The orders will immediately be routed to dealers on the inside market for automatic execution. Larger orders may be split up to meet the maximum order volume. However a broker dealer may not split orders that would otherwise be able to be entered into the NASDAQ system in an effort to increase fees or rebates. This would be considered “order shredding” and is a violation. The NASDAQ system is made up of the Order Collector Facility (OCF) and the Order Display Facility (ODF). The Order Collector Facility collects and routes orders to and from market participants. The Order Display Facility displays orders from market makers, ECNs and UTPs. Orders executed through the NASDAQ Market Center Execution System are automatically reported to ACT for clearing and settlement. Orders executed through the NASDAQ Market Center Execution System are executed based on the priority of price and time. Orders will be executed against the market maker that is quoting the best price first. If more than one market maker is quoting the same price, orders will be executed against the market maker who was the first to display the quoted price. Orders may be entered in the NASDAQ Market Center Execution System by both market makers and order entry firms. Firms may modify the way that their orders are routed to market makers by selecting one of the following order execution algorithms:
Modified price and time; this option will take into consideration access fees that may be charged by the counter parties
Price, size, time; which takes into consideration the size of the counter parties quote
Automatic executions though NASDAQ are only available to dealers that are a member of The National Securities Clearing Corporation (NSCC) or who have a clearing relationship with an NSCC member firm.
NASDAQ Order Protection Feature