Front Running, Flash Orders, or Blackbox/Algorithmic Manipulation?

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pacific7

I'm trying to find out if any other traders have been having problems with stocks that appear to have a lot of liquidity on level II only to place a market order to close a position, and the big liquidity vanishes out of thin air instantaneously??? I usually end up getting filled anywhere from 3,4,5 even 10 cents out of the money from where there was apparent big liquidity on BOTH sides of the level II when the order was sent.

Could this be the broker/dealer with some sort of blackbox scalping or shaving my trades, the broker dealer's clearing firm shaving my trades, or an outside algorithmic trading systems showing apparent liquidity for the stock then picking up on my order (from the now much talked about flash orders that high frequency traders pay for) then dropping all of their level II orders? (http://www.nytimes.com/2009/07/24/business/24trading.html?_r=3&ref=business for details on this)

It happens to me about a half a dozen times a day usually on a hot news traded stock with some volume and volatility. I've tried sending the orders on several routes including ARCA, SRDOT, NASQ, ASUROUX. They have all failed me at the worst times, usually when I have decent size in the trade). It's very frustrating and seems like a big rip-off/cheat. I have tried putting out an limit orders and they NEVER gets filled. SOMETHING always steps in front of my order. Even if the limit order is a penny away from the last print something will step in front of it even if it's a fraction of cent better than my order. How does this happen?

I trade with Sterling software. I did read a few posts awhile ago that said brokers with Sterling platform can easily front run there traders orders with black box's, but did not know it this was BS or not.

I'm really trying to get to the bottom of this issue and what's really going on. Any suggestions on changes I could make with order entry would be most appreciated.

Please do not respond to this thread if you have a problem with a certain broker dealer and are trying to throw punch's. Also, no hype from a broker dealer tying to pump their own firm.

Just the truth...!!!!

Thanks
 
I have noticed computer-type bids or offers that always penny me on less liquid names. I have the feature to always be best bid, but have never tried it. I like limit orders showing only 100 shares, seems to work best. I also have a smart-router, but have it turned off and just use ARCA. I get the best rebate if I add liquidity. As far as taking the offer, I often get less than it shows and it is immediately bid outside of me, probably also a working match type order from somebody else. If I really want to buy I put in a limit 2-3 cents above the offer and hope for the best, usually get filled lower than the limit on majority.

Another article in WSJ this weekend about high frequency. Don't have link as I read it in print. Gist of article said that programs look for a number of factors including USD, bonds, oil, etc..., and upticks/downticks in marketplace to set off programs. This sets off other firms programs and we get a rip move in either direction while they chase liquidity. When these programs see their self-induced wave starting to fade, they all set off in the other direction to get out.

Tough to figure out when they turn, but at least it explains moves like Friday morning. Dow went from down 30 to up 70 to down 20 all in about 20 minutes. My fingers, and heart, get pretty tired chasing these moves. Feel like a dog chasing its tail.
 
The exchanges really ought to charge for all this fake liquidity BS.
There ought to be rules against that kind of crap.
I understand an "illiquid" market/stock or "low-liquidity" stock but when these con-artists post fake bids/asks only to take it away as soon as they see a fill, well FUCK that! I understand when someone changes their mind/cancels an order, etc. But NOT when that mode of operation IS their way of "doing business".

These guys ought to be penalized for posting fake crap. Something like 5-6 cancels for every fill. Any more and you're playing games & ought to be kicked out/pay extra fees.
 
Quote from ang_99:

limit order

problem solved.
More...
You did not read the whole post. The OP said that limits also dont get filled.
It's as if slippage is increasing when we should have a more efficient market!
 
Quote from total_keops:

You did not read the whole post. The OP said that limits also dont get filled.
It's as if slippage is increasing when we should have a more efficient market!
More...

Not possible if the security trades through your limit you MUST get filled. Reg NMS.

You just need to wait, you'll get filled. The object of these algos is to try to get you to chase, dont.
 
Quote from risktaker:

The exchanges really ought to charge for all this fake liquidity BS.
There ought to be rules against that kind of crap.
I understand an "illiquid" market/stock or "low-liquidity" stock but when these con-artists post fake bids/asks only to take it away as soon as they see a fill, well FUCK that! I understand when someone changes their mind/cancels an order, etc. But NOT when that mode of operation IS their way of "doing business".

These guys ought to be penalized for posting fake crap. Something like 5-6 cancels for every fill. Any more and you're playing games & ought to be kicked out/pay extra fees.
More...

They're not fake, you are just experiencing latency. They can't actually put an order out and change it without taking the risk of having it out there.
 
I see this all the time. Especially on Nasdaq stocks with very liquid levels. If I am using an EDGA smart key and I try to hit the level for 40k shares when there's way more than that posted. Usually I will get filled on 500 shares or some paltry amount and the rest magically fuck off in time.

Only way I have found to avoid this is to cross the level with a routed reserve order. Then you'll get your size filled.

Then again this can be used to your advantage. Just keep pounding big levels, collecting less than a thousand shares each level as they fuck off to avoid your order thus moving the stock in your direction.

Take what they give you and use it to your advantage. If they can be cheeky bastards so can I. :D
 
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