Brokers and filling illegal orders

[MTE]

Quote from johnnyc:

Do you really believe that $2 above the ASK should be considered a "marketable limit order" ? I hope you never make a typo when placing a trade. When I think of a marketable limit order, I'm thinking like maybe .50 above the ASK tops. To me and several routing destinations $2.00 above the ASK is either an attempt to cross the market or an obvious error. But looks like we'll just have to agree to disagree on that.

Anyways, here's a couple more supporting docs if you're interested:

section IV:

Each of the maker-taker options markets (NYSE Arca and NOM) have
implemented automated systems that utilize specific logic to reject orders that would lock or cross
the market for an options class listed on those exchanges. As such, if locked or crossed markets are
more prevalent in the options markets, they are only being caused by market makers on the
traditional exchanges which do not systemically prevent locked or crossed markets.

http://www.getcollc.com/images/uploads/getco_comment_090208.pdf


Crossing the Market
Orders that would cross the consolidated market are slid or rejected depending upon the request of the subscriber.

http://www.batstrading.com/subscriber_resources/BATS_Subscriber_Manual.pdf

Here's an older letter IB wrote to SEC about the CBOE wanting to deny autoex customer orders that lock/cross the NBBO

http://www.interactivebrokers.com/e...etters/COMMENT_LETTER_ON_CBOE_99-61-FINAL.pdf

As I said, I'm not claiming to be 100% certain, I've never placed marketable limit orders that would be way above the NBBO. It's probably true that if you are way off the NBBO then the order will be rejected, but not if you are within a certain %. From 14 to 16 doesn't seem like a big deal, but obviously from 0.5 to 2 is a big deal...

In any case, I guess the best way to settle this would be to go out and place some orders and see what happens. Any volunteers?

 

[spindr0]

Quote from johnnyc:

The more responsible firms and routing destinations have a feature like this programmed into their software and routers.

I'm not pushing IB. They have their good points and their bad points (as all firms do). But I do like some of their recent programming upgrades. For example, they now have a feature which allows you to indicate your maximum trade size (shares and contracts) and if you place an order exceeding that, it flags it with an add'l confirmation screen. So if it's set at 1,000 shares, you CAN'T inadvertently place a 10,000 share order.

These features might seem over protective for the casual trader but when you have a day when the orders are flying, every tool that reduces human error is a bonus.

 

[johnnyc]

Quote from spindr0:

I'm not pushing IB. They have their good points and their bad points (as all firms do). But I do like some of their recent programming upgrades. For example, they now have a feature which allows you to indicate your maximum trade size (shares and contracts) and if you place an order exceeding that, it flags it with an add'l confirmation screen. So if it's set at 1,000 shares, you CAN'T inadvertently place a 10,000 share order.

These features might seem over protective for the casual trader but when you have a day when the orders are flying, every tool that reduces human error is a bonus.

Sounds like a good idea. I wouldn't say it's overprotective since its not required to set that from the sound of things. Probably helps people stay somewhat disciplined too I'd imagine

 

[spindr0]

Quote from MTE:

In any case, I guess the best way to settle this would be to go out and place some orders and see what happens. Any volunteers? [/B]

OK, I volunteer. I'll under bid for buying and over offer (?) for selling.
You take the other side and we'll see how we do