30 sec rule for market makers

M

MrDinky

I trade direct access but my IRA is with an online broker. According to my broker, market makers have 30 seconds to fill an order even if it trades through the price.

At 14:21 today I entered an order to buy NVDA at 27.18
At 14:26 the price trades through 27.18 down to 27.10
Over 50K shares traded that minute - no fill.
At 14:27 the price heads back up

I call the broker to complain, they call the mm (NITE), and the answer I get is it didn't trade below the price for more than 30 seconds so they're not obligated to fill me.

If this is true, then every mm can hold any order for 30 seconds as it drops below your price, buy it at the lower price and pocket the spread. If it trades above, they just claim "30 sec rule". No risk. They must have some really sh!tty traders to be losing money with these advantages. I wish I had 30 seconds to back out of or change the price on every trade I get into.
 
Oops! Just saw the recent "Order Execution" forum that this thread would've been more appropriate in. Sorry about that.
 
Originally posted by MrDinky
I trade direct access but my IRA is with an online broker. According to my broker, market makers have 30 seconds to fill an order even if it trades through the price.

At 14:21 today I entered an order to buy NVDA at 27.18
At 14:26 the price trades through 27.18 down to 27.10
Over 50K shares traded that minute - no fill.
At 14:27 the price heads back up

I call the broker to complain, they call the mm (NITE), and the answer I get is it didn't trade below the price for more than 30 seconds so they're not obligated to fill me.

If this is true, then every mm can hold any order for 30 seconds as it drops below your price, buy it at the lower price and pocket the spread. If it trades above, they just claim "30 sec rule". No risk. They must have some really sh!tty traders to be losing money with these advantages. I wish I had 30 seconds to back out of or change the price on every trade I get into.
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Your broker lied to you. You had in a limit order, and they are obligated to post it into their nasdaq quote if they do not fill it internally. That 30 second thing is nonsense. Contact NASD Regulation - they can start an inquiry for you if you get no satisfaction.
 
i show 27.16 as low trade on my time and sales.it is possible the ask never traded through your .18 bid.in that case you probably wouldnt be guaranteed to get a fill.
 
Originally posted by vhehn
i show 27.16 as low trade on my time and sales.it is possible the ask never traded through your .18 bid.in that case you probably wouldnt be guaranteed to get a fill.
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Reatick shows the same 27.16 low there, and not 27.10.

However, if he had a limit order to buy at 27.18, at some point, his bid would've had to be hit, giving him a fill at 27.18. The ask does not have to be 27.18 to get filled.

He was due a fill at 27.18 - again - his broker lied to him. I'd complain big time!
 
"However, if he had a limit order to buy at 27.18, at some point, his bid would've had to be hit, giving him a fill at 27.18. The ask does not have to be 27.18 to get filled.

He was due a fill at 27.18 - again - his broker lied to him. I'd complain big time!"

i dont think so.if he had a .18 bid and the stock never went lower than 27.16 bid 27.19 ask he may not fill.depends on orders ahead but i know you have no legitimate complaint if the ask never traded through 27.18.been down that road before.the .16 could have been isld trades and if his broker doesnt hit isld you wont fill.
his broker must be clueless though to come up with a lame excuse like that.
 
Originally posted by vhehn
"However, if he had a limit order to buy at 27.18, at some point, his bid would've had to be hit, giving him a fill at 27.18. The ask does not have to be 27.18 to get filled.

He was due a fill at 27.18 - again - his broker lied to him. I'd complain big time!"

i dont think so.if he had a .18 bid and the stock never went lower than 27.16 bid 27.19 ask he may not fill.depends on orders ahead but i know you have no legitimate complaint if the ask never traded through 27.18.been down that road before.the .16 could have been isld trades and if his broker doesnt hit isld you wont fill.
his broker must be clueless though to come up with a lame excuse like that.
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Thats the way things USED to work - the ask does not matter - he was due a fill - call the Nasdaq to ask them - they'll tell you.
 
Not sure he was due anything. Let's say I put in a limit order to buy at 27.10, for 20,000 shares at this guys broker.

And then I sell 2000 shares in the open market, driving the price down to 27.08.

Does the MM have to fill my 20k shares?

If he did, they'd be pulling that stunt all day every day.
 
Originally posted by stock777
Not sure he was due anything. Let's say I put in a limit order to buy at 27.10, for 20,000 shares at this guys broker.

And then I sell 2000 shares in the open market, driving the price down to 27.08.

Does the MM have to fill my 20k shares?

If he did, they'd be pulling that stunt all day every day.
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I don't mean to sound rude, but you guys don't understand how the market works. Let me explain:

He had an order to buy NVDA at 27.18. The price at the time he placed his order was above 27.18 (for arguments sake, lets say it was trading at 27.25 at the time), so the market maker obviously is not interested in filling his order at 27.18. Fine - nothing wrong with that.

Since the MM is not willing to sell at 27.18, he MUST either post the order to his quote at 27.18, or send the order to some other avenue for execution (an ECN) at 27.18. The fact that NVDA traded down to 27.16 shows the MM did neither, which is a clear violation of the rules. Why he didn't do it is a question for NASD Regulation. The ask price does not have to be 27.18 for execution - the fact that it traded below 27.18 is all you need to know that the MM screwed him.

In your other example, the price would never go down to 27.08 - if you're buying 20000 shares at 27.10, and someone puts in an order to sell 2000 at the market price, it would take 2000 at 27.10, leaving that buyer with 18000 left to buy at 27.10.

What does the market maker have to do? He has to abide by the rules set by the exchanges and the SEC - thats all. In the original example, the MM did not.

If you still don't believe me, call a rep at NASDR and explain it - they'll set you straight.
 
"Since the MM is not willing to sell at 27.18, he MUST either post the order to his quote at 27.18, or send the order to some other avenue for execution (an ECN) at 27.18. The fact that NVDA traded down to 27.16 shows the MM did neither, which is a clear violation of the rules. Why he didn't do it is a question for NASD Regulation. The ask price does not have to be 27.18 for execution - the fact that it traded below 27.18 is all you need to know that the MM screwed him"


i think the part you are missing is that the .16 prints may not have been a mm.if that was an isld trade for those few shares the mm may not even have been involved.so i stand by what i said if the broker he was using doesnt hit isld and the only trades under .18 were isld he gets no fill.
another example i have had is this.if there are only a few shares traded at .16 and and there is a bunch of buyers at .16 ahead of him that take up all the supply of stock at under his limit before his order turn comes up he wont get a fill.anybody who traded ipos in the old days experienced this you had to chase them several points at times even tho you bid above the ask.the only way you know none of the above happened is if the ask traded through his bid.if that happened you know he was cheated.
 
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