Beware these b/d's
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Quote from nitro:
I am confused by something here, maybe you guys can explain it to me. The bid is say 50.00 x 50.01 on a stock. You want to short it. Your B/D has a contract with you that if they can match or beat the NBBO, they can fill you internally.
I don't get why you care whether this gets filled at whoever is bidding 50.00, or with the B/D that fills you at 50.00.
I do agree with one thing, internalization does reduce volatility in share prices, so if you are talking _buying_ options I would be more intent on agreeing. But equities
Execution although troubling at times isn't the problem. The problem is what happens 3 - 10 seconds later when each and every single trade you make gets slammed against you to a point of needing to get out... EACH AND EVERY TRADE
And it doesn't matter if you take or add or even hide behind a floor broker.
Hey wanna see my cards buddy? I don't mind, go ahead and use this knowledge against me even though you say you only need to see my cards to make sure I don't get in trouble!
If you can survive in an environment like this, you definitely can trade! Myself, I can waste time and fight or survive and prosper just fine in a retail account.
bottom line is don't put limits up to avoid this issue. But now we're on to the systematic reduction of liquidity. Thanks! Nothing like a dysfunctional market!
another bonus here with a market order though, in our new world of dysfunction is it buys you a couple to a few seconds of time. This very very short space can mean the difference between a profitable trade or a trade thats about to get stuffed down your throat in a second or two.
Well yes, most 1 lots are sniffer lots. However, the real problem is when big buyers come to bid or sellers come to offer during an event driven tape, such as black swan, econ data, etc.
What happens is that the fastest HFT's will see massive flow of offers and post their own offer at not 1 millisecond but 1 MICROsecond after, at a subpenny below.
In spirit, that is frontrunning when nobody can get filled. Once the microsecond box gets filled, they systematically "stuff quotes" and send out thousands of orders away from the market and subsequently cancel to clog up SIAC, NY FIX, quotes get delayed, so then customers will panic and change orders to market. "Get me out at any price". May 6th happened because of the compounding replace orders to market.
Consider the fact that the billions of shares that cross between the fractional penny spreads is nothign more than an HFT "circle jerk" and that the billions of shares that HFT's print do not provide liquidity but phantom volume.
What happens is that the fastest HFT's will see massive flow of offers and post their own offer at not 1 millisecond but 1 MICROsecond after, at a subpenny below.
In spirit, that is frontrunning when nobody can get filled. Once the microsecond box gets filled, they systematically "stuff quotes" and send out thousands of orders away from the market and subsequently cancel to clog up SIAC, NY FIX, quotes get delayed, so then customers will panic and change orders to market. "Get me out at any price". May 6th happened because of the compounding replace orders to market.
Consider the fact that the billions of shares that cross between the fractional penny spreads is nothign more than an HFT "circle jerk" and that the billions of shares that HFT's print do not provide liquidity but phantom volume.
According to a speech by Interactive Brokers' CEO Thomas Peterffy at the World Federation of Exchanges:
"Brokers internalize stock trades and put them up at the clearinghouse. They at least are supposed to provide best execution, but best execution is vaguely defined and poorly enforced. Brokers in the U.S. must post reports showing where they route their customers' orders. But do you suppose that brokers care what's reflected in those reports? They do not.
It should be shocking, but it probably is not, that according to the Rule 606 reports mandated by the U.S. Securities and Exchange Commission, no major online broker, with the sole exception of Interactive Brokers, sent more than 5% of its orders to an organized exchange. More than 95% of their orders go to internalizers!
These brokers ignore the exchanges and sell the orders to internalizers, thereby avoiding exchange fees and getting a nice little payment from the internalizers in return. This payment for order flow adds up to real money after millions of orders are taken into account. The internalizers are supposedly matching the best prices prevailing at the exchanges, so that they can argue that the customers get the best prices.
If they did, an independent study would not have found that the one broker that actually routes the vast majority of its orders to public exchanges -- and I will not name this broker again -- obtains executions that are on the average 28 cents better per 100 shares in the U.S.... "
So in other words he is saying that the internalizers are not really matching the best NBBO. They are shading it and kicking back part of the profit to the broker dealer.
Where is the SEC on this?
I'm in. Let's have a boycott where we mass mail to all participants times and dates and maybe we can systematically wipe em out. Get it on the radio and tv and set up a couple to a few days a week where everyone who wants to join in should blast out non stop market orders. And then when they design an algo around this we'll be two steps ahead by then switching to a chaotic type form of order entry... one that doesn't have a rib to stick to