Fills between the bid and ask

M

mbv

I have a few beginner's questions about trades that occur between the bid and ask. I've done several hours of research on this but haven't found an answer.

I pulled up a Level 2 for an illiquid NASDAQ stock with a large spread and see trade volume increase, while the bid and offer aren't hit- trades appear to continue to go off at the "last price," between the bid and ask.

I don't understand how trades can happen within the bid and ask- I would have thought that a market order to buy would get routed to the best ask, and to sell to the best bid-- and anything that is not a market order is a limit order or equivalent, and thus a bid or offer.

Perhaps the trades that I see are happening on the floor, and the bids and offers on the floor don't post on my electronic platform (MB Trading's "Navigator")...?

Also, there appears to be a size requirement on Level 2 with the quotes I'm looking at. If I post an order for 100 shares, I see my order appear, but if I post a size smaller than that, I do not see my order. Can someone confirm this? And if I'm right, is there a way to see those smaller orders?

I wonder if this is the explanation for what I'm seeing: perhaps I'm not seeing bids and offers under 100 shares, and that's what continues to trade at the "last price."
 
To my knowledge, if you place orders on INET, you can choose to "hide" your order such that it does not appear in the INET book at all, and does not appear on level 2 either...When such an order gets filled, it would show as a print between the bid and ask, but you can't "see" the order on level 2.
 
u can place lmt orders in between da mkt'n'with luck u get filled sometimes...speed play a huge part on execution....if da stock is hot rest assured u get filled in between only if u sell or liquidate.
 
Quote from biologymajor:

Anybody know of video's that teach how to play the bid - ask spread?
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JDSU, CSCO, LU, INTC

Trade those, buy limit at bid, sell limit at ask.

Wait to get filled. I can't imagine it being any more complicated than that.... but what do I know about it, i have never tried it, nor ever will.
 
Most likely, they are hidden orders on INET. Also, if the market is 10.50-10.75, and you give your broker a limit buy 10.65, he may elect to fill it himself at .65, or give it to someone else who is willing to do so.

In general, odd-lots (orders for less than 100 shares) are not displayed anywhere but on the particular ECN's book feed, and sometimes not even there (NYSE, ARCA). Executions of odd-lots are not "printed" anywhere except for the INET feed (for executions that occur on INET).
 
Quote from alanm:

Most likely, they are hidden orders on INET.
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I noticed there must be hidden orders that are traded on the emini ES also. I don't see too many contracts traded on the DOM(debth of market pane) for ES contracts. I see 1,5, 20, every once in a while I see 100 contracts. But rarely more than that. It is usually 1 or 5 at a time. But the ES supposably has billions of contracts traded a day vs. some blue chip companies which trade millions of shares a day. I don't see it. They must hide their contract size also. My ES trading software doesn't allow me to hide my contract size. I only trade a few at a time, so I don't need to hide my contract size, but there are others that trade in 500, 1000 lot contracts at a time. They must be hiding theirs some way.

Does anybody elses Emini software allow them to hide their contracts from the public?
 
Quote from glenjohnson:
I noticed there must be hidden orders that are traded on the emini ES also.

AFAIK, there is no support for hidden limit orders on GLOBEX.

I don't see too many contracts traded on the DOM(debth of market pane) for ES contracts. I see 1,5, 20, every once in a while I see 100 contracts.

What do you mean? Today, during 3 randomly-selected 1-minute timeframes 09:50-11:00 ET, I saw a total of 50 trades over 100 contracts (i.e. avg ~1 every 4 seconds), the biggest of which was >700.

But the ES supposably has billions of contracts traded a day

? Average ES volume is about 1M contracts/day.

but there are others that trade in 500, 1000 lot contracts at a time. They must be hiding theirs some way.

The inside quote is usually hundreds of contracts, even outside regular trading hours. Also, people routinely take the offer or hit the bid for hundreds of contracts - these are orders you would never see because they execute immediately. Often, someone at the inside will auto-refresh their quote once they get hit. i.e. their platform allows them to tell it to buy 10K contracts, displaying 100 at a time - perhaps this is what you mean. It certainly wouldn't seem necessary to do so in the ES for less than 100 contracts most of the time.
 
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