A smart order router decides where to send an order by scanning all available trading venues and comparing their prices, liquidity and execution quality in real time. Its main goal is to find the best possible outcome for the trader, which usually means the best price with the highest chance of getting filled quickly. To do this, the router collects data from exchanges, dark pools and alternative trading systems. It then evaluates the current bid and ask levels, the depth of the order book and how fast each venue processes trades.

The router also considers trading fees, spreads and the likelihood of slippage. Some venues offer rebates or charge different rates, so the router weighs these costs before choosing a route. If the order is large, the system may split it across multiple venues to avoid affecting the market or revealing the full size at once. It tries to balance speed and discretion, especially in fast-moving markets.

Smart order routers use algorithms that constantly update as market conditions shift. If a venue becomes slower, runs out of liquidity or changes its price, the router can redirect the order immediately. This flexibility helps traders deal with fragmented markets and reduces the need for manual decision-making. In the end, the router’s logic focuses on accuracy, efficiency and consistent execution.