HYBRID, good news.

Thanks for your response Husky and Don.

This whole new system has me really worried. I'm affraid that the NYSE is just going to become like the Nasdaq. I make my living trading the NYSE, so I guess it could be time to head back to the drawing board.


Quote from Huskydog:

This was posted on Friday on the NYSE HybridTalk weblog under the heading: Q&A: Do Not Ship

"If the NYSE best bid is 50.10 x 1 and the NYSE best offer is 50.20 x 1, but the level 1 bid is arca at 50.16 x 8 and I put out a limit sell of 800 shares at 50.08 to NYSE, will I be getting the 50.16s?"

Your humble blogger responded that in this scenario, NYSE would auto-route your sell order to the market with the highest bid at top of book, in this case Arca's 50.16. An HBC (Hybrid-Building Colleague) then added that we don't guarantee you'll get the other market's price; that's something only the other market can control.

Now, another reader asks about the same scenario What if there is a no ship option for the order? -- Satya

Satya -- A Hybrid-Building Colleague responds:

If your order is designated Do Not Ship, your order will execute at the NYSE at 50.10 down to .08 to complete the order.

Since your instructions were Intermarket Sweep Order (or, Do Not Ship), we will honor those instructions. The resulting executions will be marked to the Consolidated Tape with an indicator denoting that the apparent trade-through was the result of an exempted trade, for which compliance responsibility rests with you.

Thanks for your question, Satya."
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Quote from Bitstream:

face it, this is churn and burn tradin' promoted to collect as much commissions as possible, no reason at all for a real professional to trade like this. example is ford on friday, huge predictable move: what u do there, u place orders on both sides or u accumulate on the way down? no brainer.
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Let me hazard a try at the diff in what you are talking about and what Bright is describing.

You are talking about TRADING price action.

Bright is talking about arbing market structure.

These are two different things, two diff skill sets.

If you can TRADE price action, you can make huge money. Not everyone can do it.

Those that can't, may be able to do the other. So that's what they do.

Why would anyone trade pairs if they could take a $1 or $2 move out of a stock consistently?

They wouldn't.
 
Quote from NYSEtrader123:

Thanks for your response Husky and Don.

This whole new system has me really worried. I'm affraid that the NYSE is just going to become like the Nasdaq. I make my living trading the NYSE, so I guess it could be time to head back to the drawing board.
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Change makes a lot of people nervous. When the stock markets switched from fractions to decimals, a wave of traders were washed out of the markets because they could not adapt to the new trading environment. IMO, the changes that the NYSE are making will wash out traders who either can't or don't want to adapt.

Keep in mind that change also brings on new opportunities. The NYSE will be more like Nasdaq, but with a couple of differences. The NYSE is putting into place Liquidity Replenishment points, LRPs, that will stop the auto execution of orders and turn over trading the the specialist to make the market. A description from the NYSE HybridTalk blog on Aug. 15 with the title Q&A re LRPs:

A reader writes in response to Q&A: Changes in sweeps, LRPs:

To make sure I understand this correctly:

Once a market order hits a LRP, does it convert to your typical auction type?

For example, if someone does a market sell of 50,000 shares on a stock that only trades 100,000 shares a day. It will automatically execute at each price level 5-9 cents down from the NBBO taking ECN top of book with it.

Then the specialist will open his spread as to attract liquidity providers or will it continue to autoexecute at each price level until it exhausts?

Thanks,
-Jon

Jon -- To take your questions one at a time:

Once a market order hits a LRP, does it convert to your typical auction type?
Yes.

For example, if someone does a market sell of 50,000 shares on a stock that only trades 100,000 shares a day. It will automatically execute at each price level 5-9 cents down from the NBBO taking ECN top of book with it.
The sweep function and the approach to LRPs have changed, as discussed here. Rather than the sweep resulting in a trade at the inside and a trade at the clean-up, in response to customer feedback we have modified the sweep to execute at each price point, including all liquidity at each level before moving to the next price point. To the extent that other markets have better prices, the NYSE will automatically route to those markets as long as the customer has not indicated on their order to do otherwise.

The new LRP will replace the two previously proposed LRPs and will be a set of values based a stock's price and volume. Those values will be updated and published by the NYSE periodically during the course of the day. It is possible to hit one of the LRP values, and when you do, all the LRP procedures apply. Details of the new LRP will be announced soon.

Then the specialist will open his spread as to attract liquidity providers or will it continue to autoexecute at each price level until it exhausts?
No, the system will provide a quote with one or both sides of the quote marked as an LRP and a "slow" quote with an E, F or U indicator. This indicator through the Consolidated Tape Association notifies users that an LRP has been hit and that the quote is no longer considered "firm". The specialist is required to either resume auto-quoting if the market is not locked or crossed, or conduct an auction and trade if it is locked or crossed.

In a situation where the market is not locked or crossed, if no action occurs within 5 seconds, then the system will resume auto-quoting. In a case where the market is locked or crossed, the system will not resume until a trade is clears the condition.

Hope that helps. Thanks for writing, and sorry for not responding faster. And thanks also to my Hybrid-Building Colleague and GTF (George Thorogood Fan) who helped with this answer.

The specialist will actually have more control once Regulation NMS goes into effect. Currently, ARCA and other ecns can trade through the NYSE quote. After Reg. NMS goes into effect, this will no longer be the case, which implies that if a sudden imbalance in orders comes into a stock and the LRPs are hit, the specialist will actually be able to control the action until his trade goes off and the auto-quoting resumes. I'm sure there are some nuances that I have missed here, but the new rules will offer interesting opportunities for traders. Just keep on top of the rules changes, adapt your trading methodology to the new rules, and you'll be fine.
 
Quote from Huskydog:

The new LRP will replace the two previously proposed LRPs and will be a set of values based a stock's price and volume. Those values will be updated and published by the NYSE periodically during the course of the day. It is possible to hit one of the LRP values, and when you do, all the LRP procedures apply. Details of the new LRP will be announced soon.
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Can someone explain to me a bit better what this means? I need this dummied down for me! :)

so if i sent a market order for 20k and the order hit one of these LRP's is that where my order gets filled...or does my order just send a signal to the specialist that he now has to work cause someone is severly affecting the stock price so then he decides where to fill my order....which could be at a price even further away from the LRP?
 
Quote from Bitstream:

face it, this is churn and burn tradin' promoted to collect as much commissions as possible, no reason at all for a real professional to trade like this. example is ford on friday, huge predictable move: what u do there, u place orders on both sides or u accumulate on the way down? no brainer.
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My friend Mr. Bitstream...there is so much more to the various strategies that my (excellent) traders engage in than you seem to acknowledge. Our pairs people do make dollars, but do not like the idea of being part of the "gamble" of market direction. You say you did well with Ford, well we did well with GM...when everyone was hammering it around $20 or so, we loaded up when the conventional wisdom and street talk was about "bankruptcy". We have the capital to take risks like that, many of our traders may not (yet anyway, LOL)...so they prefer market neutral trading. They "may" use trade frequency to enhance their profits (check MSchey sometime), but a big chunk is made with those "dollar moves" you talk about.

I hope that our traders utilize all the various facets of trading expertise in their careers...because you simply cannot stick to one type of strategy, IMO.

All the best....good job with Ford, I hope you continued success.

Don
 
Quote from madmunny:

Can someone explain to me a bit better what this means? I need this dummied down for me! :)

so if i sent a market order for 20k and the order hit one of these LRP's is that where my order gets filled...or does my order just send a signal to the specialist that he now has to work cause someone is severly affecting the stock price so then he decides where to fill my order....which could be at a price even further away from the LRP?
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http://hybridtalk.nyse.com/archives/2006/09/new_lrp.php

Read through this, it's pretty self explanatory.

Don
 
Quote from Bitstream:

face it, this is churn and burn tradin' promoted to collect as much commissions as possible, no reason at all for a real professional to trade like this. example is ford on friday, huge predictable move: what u do there, u place orders on both sides or u accumulate on the way down? no brainer.
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wow. you're an idiot.
 
I have to say, i'm still not totally clear on the LRP thing. If you could give me more info on this, that would be greatly appreciated.

Thanks again for your help.


Quote from Huskydog:

The specialist will actually have more control once Regulation NMS goes into effect. Currently, ARCA and other ecns can trade through the NYSE quote. After Reg. NMS goes into effect, this will no longer be the case, which implies that if a sudden imbalance in orders comes into a stock and the LRPs are hit, the specialist will actually be able to control the action until his trade goes off and the auto-quoting resumes. I'm sure there are some nuances that I have missed here, but the new rules will offer interesting opportunities for traders. Just keep on top of the rules changes, adapt your trading methodology to the new rules, and you'll be fine. [/B]
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I wasn't around for the first major change (fractions to decimals), but i heard it was brutal at first for many traders.

One of the problems I have with the change is that now we have the electronic Nasdaq and the Specialist system at the NYSE and the choice to trade either one or both. If the NYSE becomes completely electronic we will have lost one of the two options (which also happens to be the one that i prefer for daytrading). But like you're saying only the strong survive (in this business even more so than others). So i'll be ready to work my tail off because it would really suck to have to go back to a 9-5 office job.
 
Am I missing something here? I trade NYSE stocks on ARCA all the time. How is this new? I just checked my net sheets and yes, I get a rebate of .002 and get charged .003 for taking.
 
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