Adding or Removing liquidity...

[Szeven]

This poll is to get an idea of what people think about adding and removing liquidity on a reserve/iceberg/hidden order.

I think that if someone displays 500 shares and has 4500 reserve, and i buy 5000, i should get adding liquidity credits for the 4500 cause i went out on a limb and displayed a bigger lot that the other guy. Same with hidden. If someone is hidden 1000 INET/NSDQ, and i sell into them, i should get the adding credits. At the very least, the credit for reserve or hidden should be reduced for both sides. Instead of .002 credit they pay .0005, and instead of .003 to removed, they pay .0005. Same margin, just more fair.

In my opinion, EDGA has it right. If you hide on EDGA, you get charged .003, and if you remove in EDGA, its free. I think arca and nasdaq should follow this business model with hidden, as well as reserve.

What do you think?

 

[Szeven]

Surely theres more than 1 daytrader on this site who removes liquidity and can comment...?

 

[trom]

The firm where I trade doesn't charge/give rebates. I can take 2000 shares or get filled on the bid for 2000 shares on any ECN/exchange and the cost is the same to me.

That being said, I would like to see a pay structure that would reward posting visible liquidity, of course.

Anything that makes the market more transparent gets a thumbs up from me.

As it's best for me personally, I voted for the "reverse it" option.

 

[PARACLESE]

I would absolutely love to get paid for removing liquidity, but this is not the best structure for nasdaq as they would get raped as they did with inet in the past. remember when inet paid .9 for removal? I think it should be mixed. a company like edge can do something like this and attract alot of liquidity. I personally would rather go back to the old nyse structure/ and pay nothing to ad or remove.

 

[eusdaiki]

I used to like the whole getting paid to remove from Island... People used to post on Island not cause of the credits but simply cause it was the first ecn to get hit everytime.

That being said. I think we should have more diversified offers. Have some ecn's that charge to add and pay to remove [pay $0.20 on 100 shares to remove and charge 0.25 to add... ]
An ECN that's struggling to survive, such as TRAC, could use such a unique approach... what's the worse that can happen, they go broke? They're heading that way anyway. If it works it could turn the ECN around.

 

[Szeven]

Quote from eusdaiki:

I used to like the whole getting paid to remove from Island... People used to post on Island not cause of the credits but simply cause it was the first ecn to get hit everytime.

That being said. I think we should have more diversified offers. Have some ecn's that charge to add and pay to remove [pay $0.20 on 100 shares to remove and charge 0.25 to add... ]
An ECN that's struggling to survive, such as TRAC, could use such a unique approach... what's the worse that can happen, they go broke? They're heading that way anyway. If it works it could turn the ECN around.

Sounds like a good idea to me. The 'firesale' rate shaving for market share, then sell yourself to arca/nasdaq seems to be an old routine. I agree trac should reverse or something.

I just think that its not fair that someone places hidden or reserve and are not charged a fee for that service. Every other thing in teh world that has added features costs more. I say .002 to add for the displayed lot, and .001 to add for the reserve/hidden part. And then .003 to remove display, .002 to remove hidden/reserve.

Step up TRAC!

 

[eusdaiki]

Quote from Szeven:

Sounds like a good idea to me. The 'firesale' rate shaving for market share, then sell yourself to arca/nasdaq seems to be an old routine. I agree trac should reverse or something.

I just think that its not fair that someone places hidden or reserve and are not charged a fee for that service. Every other thing in teh world that has added features costs more. I say .002 to add for the displayed lot, and .001 to add for the reserve/hidden part. And then .003 to remove display, .002 to remove hidden/reserve.

Step up TRAC!

Hmm... The hidden and reserve orders, along with the dark books, are becoming more and more common everyday... It just makes sense if you're trading some dry symbol and you need to move a lot of volume, slippage goes down when your orders are hidden.


I wonder what's gonna happen when most of the volume for a stock goes through darkbooks, hidden orders and reserves?

 

[joe_blo]

Quote from Szeven:

I just think that its not fair that someone places hidden or reserve and are not charged a fee for that service. Every other thing in teh world that has added features costs more. I say .002 to add for the displayed lot, and .001 to add for the reserve/hidden part. And then .003 to remove display, .002 to remove hidden/reserve.

Not fair? Feh.

Poster of liquidity makes a huge sacrifice for his measly $0.002. Essentially writes a free option to the market, and the instant price sentiment changes, is vulnerable to being picked off.

Furthermore, ever wonder why price improvement is given to the liquidity taker? A standing $10.15 bid crossing with an incoming $10.10 offer yields a $10.15 cross price, giving $0.05 to the liquidity taker! Is this fair? Maybe $10.125 would be more fair?

Besides, why would you not want to pay $0.003 to get certainty of execution rather than be paid a measly $0.002 and risk non-execution anyway? Or are you concerned about accidental takings of hidden orders. BATS has an order type catering to people who like to play penny-spread rebate games - "Post Only" orders won't accidentally remove liquidity.

Hidden and reserve orders are already disadvantaged by reduced priority at the same price, but it seems someone at Nasdaq agrees with you, if only to a lesser degree:
Effective January 2, 2008, the rebate for orders entered as non-display will be $0.0001 less than the rebate for displayed liquidity for all securities.
(from http://nasdaqtrader.com/Trader/News/2007/headtraderalerts/hta2007-239.stm )

 

[Szeven]

Quote from joe_blo:

Not fair? Feh.

Poster of liquidity makes a huge sacrifice for his measly $0.002. Essentially writes a free option to the market, and the instant price sentiment changes, is vulnerable to being picked off.

Furthermore, ever wonder why price improvement is given to the liquidity taker? A standing $10.15 bid crossing with an incoming $10.10 offer yields a $10.15 cross price, giving $0.05 to the liquidity taker! Is this fair? Maybe $10.125 would be more fair?

Besides, why would you not want to pay $0.003 to get certainty of execution rather than be paid a measly $0.002 and risk non-execution anyway? Or are you concerned about accidental takings of hidden orders. BATS has an order type catering to people who like to play penny-spread rebate games - "Post Only" orders won't accidentally remove liquidity.

Hidden and reserve orders are already disadvantaged by reduced priority at the same price, but it seems someone at Nasdaq agrees with you, if only to a lesser degree:
Effective January 2, 2008, the rebate for orders entered as non-display will be $0.0001 less than the rebate for displayed liquidity for all securities.
(from http://nasdaqtrader.com/Trader/News/2007/headtraderalerts/hta2007-239.stm )

Funny about the .0001 thats not going to make a big diff, .001 would have been better. But, that would only be if the fee to remove would be reduced as well.

I dont have a problem with hidden/reserve or paying fees to remove, i just think that your not providing any liquidity in a way that you deserve a credit. you dont get credits for adding on Millenium/Pipeline/Liquidnet/Lava/ATD etc. because they are non display, so i dont think you should get credits for hiding. If your not confident that your price is efficient and will be left behind by instant change, i say good, screw you...lol.

As for the price improvement, what you are talking about is similar to what hybrid thought it could do when it came out. If there were bids .15.14.13.12.11 etc, and someone crossed .11 offer, the .15 would print at the inside price, and the 14 13 12 would get cleaned up to a final .11 print. They had to change that because people figured they would just 'walk the book' down each level. So i dont think that is an option.