Adapting to the Hybrid

[BuddhaTop]

I found this post on the nyse hybrid blog.

Looks like a lot of prop traders are complaining about the poor executions with the hybrid. The edge in tape reading NYSE seems to be gone.

How's everyone doing right now?


http://hybridtalk.nyse.com/archives/2007/02/prop_trader.php

 

[thurstonhowell3]

Quote from Scalper007:

Here is an odd situation I noticed today in MAN. The stock is trading at 75.42 and then all of a sudden PSE is printing $1 below at 74.42. The specialist freezes and all the other ecns are still at 75.42. I have a bid at 74.80. Then the specialist resumes, brings down the stock to 75, and then blasts off to 75.75..I have never seen this kinda crap take place before on the nyse. Can someone please explain to me what is happening here? Why the hell would pse trade $1 below the current market price? And then why didn't the specialist bring the stock down to where pse traded?

This hybrid has created a circus out of the nyse and I've become a clueless clown.

Please see attached for t&s

By the way, thank you Don for the sweep answer.

As you probably know, PSE is ARCA. What happened here is someone fat fingered a limit order to S 11,900 MAN 74.42 ARCA. He clearly meant to enter S 11,900 MAN 75.42 ARCA. Per current ARCA smart router FIX specs (which will change with Reg NMS), the order hit down to 74.42 within the ARCA book. His use of a limit order hurt him here, as a market order in ARCA would have entitled him to NBBO processing and required ARCA to route out. Marketable limit orders for listed stock are not afforded the same protection. See the attchaed T&S which follows where yours left off. NYSE continued to trade ~$1 higher, as did NASDAQ. NYSE in this instance is blameless. Just another trader that shot himself in the foot.

The unfortunate trader likely requested a ruling from the PCX on this trade. I believe that the trade stood due to the following:

Ruling Resolution Criteria
Upon request for ruling, NYSE Arca primarily considers the numerical factors of the execution price(s) and the trade(s) in question. In addition to the numerical guidelines, NYSE Arca may incorporate additional factors (see “Additional Factors” below).
Numerical Guidelines
Core Session:
• Securities priced < 100 dollars, executions greater than $1.00 or 10% away from the consolidated last sale.
• Securities priced = or >100 dollars, executions greater than $2.00 away from the consolidated last sale.

 

[eusdaiki]

jeje...

the nicest part of all this is that if you where to call for erroneous trade they'll laugh in your face, you need to be about 40% off to even have a chance of breaking the trade...

 

[wilburbear]

Quote from thurstonhowell3:

As you probably know, PSE is ARCA. What happened here is someone fat fingered a limit order to S 11,900 MAN 74.42 ARCA. He clearly meant to enter S 11,900 MAN 75.42 ARCA. Per current ARCA smart router FIX specs (which will change with Reg NMS), the order hit down to 74.42 within the ARCA book. His use of a limit order hurt him here, as a market order in ARCA would have entitled him to NBBO processing and required ARCA to route out. Marketable limit orders for listed stock are not afforded the same protection. See the attchaed T&S which follows where yours left off. NYSE continued to trade ~$1 higher, as did NASDAQ. NYSE in this instance is blameless. Just another trader that shot himself in the foot.

The unfortunate trader likely requested a ruling from the PCX on this trade. I believe that the trade stood due to the following:

Ruling Resolution Criteria
Upon request for ruling, NYSE Arca primarily considers the numerical factors of the execution price(s) and the trade(s) in question. In addition to the numerical guidelines, NYSE Arca may incorporate additional factors (see “Additional Factors” below).
Numerical Guidelines
Core Session:
• Securities priced < 100 dollars, executions greater than $1.00 or 10% away from the consolidated last sale.
• Securities priced = or >100 dollars, executions greater than $2.00 away from the consolidated last sale.

In what ways will Reg NMS change the scenario given above?

 

[ig0r]

Quote from wilburbear:

In what ways will Reg NMS change the scenario given above?

Correct me if I'm wrong, but ARCA will be forced to check top of the book at all other market centers (even if it's a limit order sent to them, assuming its not marked ISO) before sweeping it down on it's own book.

 

[eusdaiki]

Yes. Even if they dont route out to other markets the order would have to sit in the ARCA book without removing liquidity beyond the NBBO and without displaying a locked market.

 

[rynmcd]

Correction from previous posts - the specialist has NO control over bid or offers on the 'inside' market. If an LRP is hit, the specialist prices the market order as he would have pre-hybrid. there is no removing bid/ask. we are dealing with the same problems on the floor you guys are having.

 

[eusdaiki]

Quote from rynmcd:

Correction from previous posts - the specialist has NO control over bid or offers on the 'inside' market. If an LRP is hit, the specialist prices the market order as he would have pre-hybrid. there is no removing bid/ask. we are dealing with the same problems on the floor you guys are having.

Is not the same, before hybrid we had direct+

 

[Moneyball]

Quote from rynmcd:

Correction from previous posts - the specialist has NO control over bid or offers on the 'inside' market. If an LRP is hit, the specialist prices the market order as he would have pre-hybrid. there is no removing bid/ask. we are dealing with the same problems on the floor you guys are having.

By "we" I'm assuming you're a specialist or on the floor in some capacity? Just curious as to how you guys have been doing with the Hybrid. I assume it's much more difficult since you don't control things nearly as much as before?

 

[rynmcd]

Quote from Moneyball:

By "we" I'm assuming you're a specialist or on the floor in some capacity? Just curious as to how you guys have been doing with the Hybrid. I assume it's much more difficult since you don't control things nearly as much as before?

Specialists' realization(P&L) rates are down floorwide, but so are costs - it takes less than half the people to maintain markets because most tasks are automated. Many of the easy trades have been eliminated and the advantage to trading on the floor has diminished. There will be opportunity for those that stick around to see 2008, but the game is more like day trading than market making. The key will be for NYSE to regain some market share, which looks to be a challenging task.