Thanks to MyMoneyBlog, I will soon be the owner of an iPod Shuffle courtesy of ex24. ex24 operates order books for a handful of securities that allow it's customers to trade odd lots (less than 100 shares) amongst themselves. Basically, they are both an ECN, like Island (now INET) or Archipelago, and a broker/dealer. The description of how quoting works on their order books makes for somewhat interesting reading.
At times when the CQS is not operating, ex24 raises its offer quote by one cent each time members collectively buy from ex24 for a net 99 shares in that after-hours session and lower its bid quote each time members collectively sell to ex24 for a net 99 shares in the after-hours session. If ex24 raises (lowers) its offer (bid) quote due to after-hours purchases (sales), it increases (lowers) its bid (offer) quote by the same amount to maintain the same spread width. After ex24 has raised (lowered) its offer (bid) quote by five cents it either keeps its quote at that price or deletes its offer (bid) quote, depending on market conditions.
The decision whether to freeze the quote or delete it is effected pursuant to an algorithm that operates automatically. This trading parameter is intended to provide ex24 a degree of protection from the risk associated with posting quotes during times when CQS is not operating. Additionally, ex24 reserves the right to withdraw its quotes at any time during the after-hours session, which it might do in response to significant news affecting the price of a security traded on ex24 at times when CQS is not operating.
Finally, ex24 may program its algorithm to refrain from posting its offer (bid) quote if customer orders to sell (buy) at or near the CQS offer quote reside on the ATS. ex24 is in the process of determining the amount of customer orders that might cause it to refrain from posting a quote. Regardless of the metric chosen by ex24, the algorithm which determines whether or not to disseminate a quote operates automatically.
The state is that great fiction by which everyone tries to live at the expense of everyone else. - Frederic Bastiat