Can people jump ahead of your limit orders on NYSE b/c of the "parity rule?"

Love2Trade$ said:
Understood both responses, thanks a lot!
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IMO, I would only use the NYSE for the open and close for NYSE listed stocks. I would use NASDAQ for opening and close for NASDAQ listed stocks. I would add liquidity on either ARCA, NASDAQ or EDGX. For Lightspeed Trader clients, I would use the LSPT route to take liquidity during trading hours to save money on the take fee ($0.0015/share vs $0.003/share).
For most of my traders, this works well. I have some high volume day-traders on Sterling that prefer dark pools for mid-cap stocks. I have some large long/short funds that need to be concerned with their market impact that use a number of routes and order types including VWAP and TWAP.

Bob
 
Love2Trade$ said:
Hi Lovers of Order Execution! :D

Short article by Themis Trading on NYSE limit order jumping "on parity": https://blog.themistrading.com/2019/01/the-cost-of-parity/ . If I understood this article correctly - Designated Market Makers (DMMs), floor brokers, and people who hire floor brokers (Firms - hedge funds, high frequency trading firms, other) are all allowed to trade "on parity" (read - jump ahead of you or at least next to you) with your limit orders even though you sent yours first.
  1. Am I understanding this correct or are there angles / nuances I'm missing that makes this not as bad as it seems?
  2. What can an individual retail investor (or even a small startup prop firm) do to combat this even to a degree?
Thank you for your thoughts!
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It happens more often than most people realize. I trade mostly options and lots of times, my order is the lowest asked price and market makers match my price and I am at the bottom of the heap. Never mind that I was there first in line and offered that price first! That is the reality of it. When that happens, I just cancel my order unless, I want to get out that bad. If I want to get out, I will just lower by asked price a couple of notches lower. Let the market maker chase and give up his profits if he wants to! They stand to lose a lot more in profits. Most times, they will just stop matching your price.
 
Robert Morse said:
IMO, I would only use the NYSE for the open and close for NYSE listed stocks. I would use NASDAQ for opening and close for NASDAQ listed stocks. I would add liquidity on either ARCA, NASDAQ or EDGX. For Lightspeed Trader clients, I would use the LSPT route to take liquidity during trading hours to save money on the take fee ($0.0015/share vs $0.003/share).
For most of my traders, this works well. I have some high volume day-traders on Sterling that prefer dark pools for mid-cap stocks. I have some large long/short funds that need to be concerned with their market impact that use a number of routes and order types including VWAP and TWAP.

Bob
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Thanks a lot for this order execution gold @Robert Morse ! I added it to my notes.
  1. When you say the open and the close do you mean in the last 15 mins, last hour, or only if I'm submitting specific open/close order types like market on close, limit on close, etc?
  2. What would you recommend for taking liquidity, especially for: any extended hours (pre/post), Nasdaq listed stocks, any volume but more often micro / small caps?
 
smallfil said:
It happens more often than most people realize. I trade mostly options and lots of times, my order is the lowest asked price and market makers match my price and I am at the bottom of the heap. Never mind that I was there first in line and offered that price first! That is the reality of it. When that happens, I just cancel my order unless, I want to get out that bad. If I want to get out, I will just lower by asked price a couple of notches lower. Let the market maker chase and give up his profits if he wants to! They stand to lose a lot more in profits. Most times, they will just stop matching your price.
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Thanks for expanding on a real-world example @smallfil ! What you said helps me understand the same about some of my NYSE equity trades, and I will keep your dropping a couple ticks exit strategy in mind!
 
Love2Trade$ said:
Thanks a lot for this order execution gold @Robert Morse ! I added it to my notes.
  1. When you say the open and the close do you mean in the last 15 mins, last hour, or only if I'm submitting specific open/close order types like market on close, limit on close, etc?
  2. What would you recommend for taking liquidity, especially for: any extended hours (pre/post), Nasdaq listed stocks, any volume but more often micro / small caps?
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#1. The NYSE and NASDAQ have an opening and closing auction.
https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Opening_and_Closing_Auctions_Fact_Sheet.pdf
https://www.nasdaqtrader.com/content/ProductsServices/Trading/Crosses/openclose_faqs.pdf

#2. I have no preference and have no data that it makes a difference except ARCA charges a little extra if they have to re-route your order to another exchange ($0.0035 vs $0.0030) so I would stick with NASDAQ or EDGX.
 
Understood, thanks for the handy links! Oh quick question forgot to ask at the beginning: Does parity apply to ALL 4 NYSE owned markets - NYSE, NYSE National, NYSE ARCA, NYSE AMEX? Thanks for the help!
 
Love2Trade$ said:
Floor broker client submits 100 share limit buy $10.07 @ 10:13:45 am (later than me by 25 seconds).
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I don't know for sure, but why would Floor broker need to be submitting orders to be in the que? I think the idea is to have it both ways - if they want to submit(display) they can, but they don't have to. Isn't that the whole point of parity?
 
qlai said:
I don't know for sure, but why would Floor broker need to be submitting orders to be in the que?
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The floor broker must have the order live on their terminal submitted to the NYSE order book to get their match. The days of telling the Specialist you have an order are gone.
 
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