Adapting to the Hybrid

[wilburbear]

Quote from danjos:

Don:

How do the enveloping strategy fares in HYBRID?

There is a new fee structure which will charge fees for NYSE orders when the ratio of order cancellation vs Fill > 90%.
Dont know if you are aware of this.

I believe the NYSE is discouraging this kind of practice (ENVELOPING). However, I cannot understand why they would also count IOC order that gets cancelled. Because this is a legitimate order that doesnt recieve fill. Therefore it should not be counted as cancelled orders.

Dnajos:eek:

We have cancellation fees in the options markets. The reason for the fees was given as data capacity constraints. Now we discover that options will be priced in pennies (starting this month). Option exchange disseminated data will increase significantly. No capacity constraints were mentioned for this change.

NYSE cancel fees are also a method for confiscating trader profits. The NYSE bragged about it's ability to handle data, in its attempt to attract some of the algo business.

Contact a lawyer. It's an interesting question - can an exchange change it's rules simply to discourage profitable trading. One thing's for sure - they'll keep trying discriminatory rules and fees if you don't challenge them.

 

[Steelhead]

you can bet your bottom dollar those cancellation fees will not be applied to everyone

 

[Don Bright]

OK, according to my people at GS, the only cancellation fees in effect are for the options floor, not for DOT orders on equities.

Things could change, and if anyone has a reference I would be happy to see it.

Don

 

[mats]

suppose cancellation fees will come for NYSE and AMEX stocks. This will give privileges to specialist. In that case you could just route to inet or some other ecn which does not have these these cancellation fees.

 

[danjos]

Quote from Don Bright:

OK, according to my people at GS, the only cancellation fees in effect are for the options floor, not for DOT orders on equities.

Things could change, and if anyone has a reference I would be happy to see it.

Don

Here is the memo that I received from Assent. They refers to the link as the basis of new RULE>

1) New Trading Costs – AMEX & NYSE Order Cancellation Charges (a/k/a “Excessive Messaging Fees”)

As some of you may already be aware, a few months ago, the NYSE and the American Stock Exchange have introduced new fees that are levied upon the firm when certain order cancellation ratio thresholds have been exceeded.

At a very high level, where the ratio of orders placed to actual executions is deemed too out of line (i.e. many orders, very few executions) the NYSE and the AMEX will levy an order cancellation fee (per order). Each exchange has its own method of calculating and charging the fee. For example, on the AMEX, the first 100,000 cancellations within a given month are exempt from the new fee. Also, native IOC orders are not subject to the cancellation fees on the AMEX, but this same distinction is not carried over to the NYSE which takes into account “all cancels” when computing its percentage of orders to executions.

Links to Official Exchange Filings Related to these “Excessive Messaging” Fees

For those interested, here’s a link to the original SEC filing that introduced the concept of these fees from a NYSE perspective:

http://www.sec.gov/rules/sro/nyse/34-53071.pdf

And, here’s a link to the AMEX filing, which describes the basis for their order cancellation fees, which as noted above, are greater than those charged by the NYSE:

http://edgar.sec.gov/rules/sro/amex/34-52533.pdf

Let us know if anybody can confirm whether the new fees are indeed for OPTION or stock also


Danjos

 

[mats]

Thanks Danjos for your information.
What will happen when I route to for example Inet. (this would be a kind of solution, I think)

 

[Don Bright]

OK, it seems we should be ok since I'm told that "if" they start doing this, "then" it will apply to Goldman Sachs (or whoever you clear with) as a whole, thus making it very doubtful that any of my traders could cause a greater than >90% cancellation rate.

(Don't hold me to this, just what I'm told at this time).

Don

 

[Steve Tvardek]

I'm pretty sure the whole point of why they do this is to take advantage of an opening orders "edge" for NYSE. I dont know for sure, but my impression is routing to INET would probably be worthless as the edge lies in NYSE opening fills?

just a guess, I'm sure Don or whoever will clear that up.

Quote from mats:

Thanks Danjos for your information.
What will happen when I route to for example Inet. (this would be a kind of solution, I think)

 

[Don Bright]

Quote from Steve Tvardek:

I'm pretty sure the whole point of why they do this is to take advantage of an opening orders "edge" for NYSE. I dont know for sure, but my impression is routing to INET would probably be worthless as the edge lies in NYSE opening fills?

just a guess, I'm sure Don or whoever will clear that up.

Opening only orders shouldn't be affected by cancellation fees. I do get a report showing how many we enter and how many are filled (just in case). But since they automatically cancel when not filled, I don't think we're talking about the openings.

Some "uncharted" territory coming up in 2007. We'll have to see...I just hope that "Big Brother Goldman Sachs" takes care of us, LOL.

Don

 

[Steve Tvardek]

Whoops, sorry for butting my nose in then. I really should just stick to what I know

Quote from Don Bright:

Opening only orders shouldn't be affected by cancellation fees. I do get a report showing how many we enter and how many are filled (just in case). But since they automatically cancel when not filled, I don't think we're talking about the openings.

Some "uncharted" territory coming up in 2007. We'll have to see...I just hope that "Big Brother Goldman Sachs" takes care of us, LOL.

Don