Flaw in ARCA open logic nails me

F

fbell50

This is the tale of how ARCA can execute a market on open order more than 7% outside its own bid-ask. On 7/14/2015 my order to buy 600 CNXT, a Chinese index etf, executed at 51.48. The ARCA opening session runs between 9:29 and 9:30. Between 9:28:58 and 9:30 the ARCA ask ranged between 47.88 and 47.96 and at 9:30 is 47.33. The ask size was always greater 600.

Somehow my order executes at 51.48. How can this be? After discussing this with my broker and ARCA I learn that the last trade, which was at 52 at 4:12:30, 5 hours 17 minutes earlier set the basis for the open's price band. The lowest price the open could execute was 1% off 52, or 51.48.

I cannot understand how setting a price band outside of the bid-ask when the bid ask quantity is greater than order quantity can ever be right. I now understand why I was the only order to execute on the open.

Trades & quotes from CTA:

4:12:30 CNXT trade 175 at 52

9:28:58 CNXT ask 54x47.95
9:29:23 CNXT ask 55x47.91
9:29:26 CNXT ask 58x47.95
9:29:31 CNXT ask 53x47.91
9:29:50 CNXT ask 41x47.96
9:29:52 CNXT ask 41x47.96
9:29:55 CNXT ask 41x47.88
9:29:57 CNXT ask 36x47.92
9:29:57 CNXT ask 56x47.89
9:30:00 CNXT ask 9x47.33

9:30:00 CNXT open 600 at 51.48
 
fbell50 said:
The lowest price the open could execute was 1% off 52, or 51.48.
More...

Who says? Where is this rule? Any link to show this? Never heard this before in my life, but if it is true, it would be good to know about.

Put limits on your opening orders?
 
This doesn't sound right. The only collar mentioned in their auction rules relates to the closing auction...and it's 10% not 1%.

https://www.nyse.com/markets/nyse-arca/trading-info#market

I would keep pushing back unless they can provide you with some docs that demonstrate the rule. Based on experience, it's definitely possible, likely even, that both the broker and exchange rep have no idea what they're talking about.
 
Arca support sent me the following notice posted 4/10/2015:

· NYSE Arca Equities Enhancements to Auction Collars

02:10 pm, 2015-04-10

Market

NYSE ARCA EQUITIES

Beginning Monday, April 13, 2015, NYSE Arca Equities is implementing new parameters for all of its Auction Collar logic. The new parameters will prevent Auction trades from executing outside of the following percentages:

Last Consolidated Price* Collar Percentage

0.01 to 25.00 5%

25.01 to 50.00 2%

50.01 and higher 1%



*If there is no Last Consolidated Price prior to an Auction, the collar percentage will be calculated based on the previous close. Current Auction Collar percentages are 10%, 5%, and 3%, respectively.

For further information on these new collars, please contact one of the parties below:

NYSE Arca Trading Operations
trading@nyse.com
888-513-9873
 
Wow. Hard to believe that this isn't posted with their auction rules and one is expected to comb through exchange memos to stay on stop of order types. So a last price from ages ago is considered a better anchor than current NBBO...that's twilight zone stuff.
 
fbell50 said:
Arca support sent me the following notice posted 4/10/2015:

· NYSE Arca Equities Enhancements to Auction Collars

02:10 pm, 2015-04-10

Market

NYSE ARCA EQUITIES

Beginning Monday, April 13, 2015, NYSE Arca Equities is implementing new parameters for all of its Auction Collar logic. The new parameters will prevent Auction trades from executing outside of the following percentages:

Last Consolidated Price* Collar Percentage

0.01 to 25.00 5%

25.01 to 50.00 2%

50.01 and higher 1%



*If there is no Last Consolidated Price prior to an Auction, the collar percentage will be calculated based on the previous close. Current Auction Collar percentages are 10%, 5%, and 3%, respectively.

For further information on these new collars, please contact one of the parties below:

NYSE Arca Trading Operations
trading@nyse.com
888-513-9873
More...

This notice is for Auction trade only, nothing to do with trade at the opening, unless your order was transformed into an Auction.
As for your specific case, at 9 am their was only a 9 lot on the offer and you were bidding 600. Putting market order during the pre-opening is very risky and you never know at what price you'll be filled.
 
rb7 said:
This notice is for Auction trade only, nothing to do with trade at the opening, unless your order was transformed into an Auction.
As for your specific case, at 9 am their was only a 9 lot on the offer and you were bidding 600. Putting market order during the pre-opening is very risky and you never know at what price you'll be filled.
More...

You obviously didn't read my initial post carefully or you would have seen that I was talking about their 9:30 auction.
 
This is unreal. I suppose HFT needs new "rules" in place to game the traders, I can't see any rational reason for doing this as the previous system was working fine.
 
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