Level II quotes for only 100 shares???

[yukon_cornelius]

Looking through the Level II quotes for various low priced stocks (trading at around $2 per share), I see many market makers have quotes for only 100 shares.

What's the deal with that? Why would anyone want to buy or sell only 100 shares of a stock trading for $2?

 

[sallyboy]

You are only seeing what they are posting to buy or sell, not what they may be willing to buy and sell. If they wanted to buy/sell 10,000 shares, would they show it? Probably not.

In addition, keep in mind that LII doesn't show other participants in the market who aren't posting a bid or offer, but may "hit" bids & offers posted.

 

[yukon_cornelius]

sallyboy,

Thanks for the info, but I still don't follow.

Suppose that two market makers have asks of 100 shares each at 2.35 and 2.36. I have an ask on the Island at 2.37 for 1000 shares. Then some guy comes along and places a market order for 1000 shares. What happens?

 

[Turok]

Yukon, situations vary of course but often what you are seeing are MMs showing 100 shares because they have no current active desire to trade a stock, but are required by regulation to make a market. 100 shares is often the minimum that can be displayed to retain the market making right.

>Suppose that two market makers have asks
>of 100 shares each at 2.35 and 2.36. I have
>an ask on the Island at 2.37 for 1000 shares.
>Then some guy comes along and places a
>market order for 1000 shares. What happens?

(for the moment, let's not confuse your described "market order" with some direct access broker provided market order mechanism which may break your order down into a whole bunch of ways, but rather let's stipulate that the market order reaches a MM whole.)

(also, lets say that after your 2.37 X 1000 share ask, the next ask is 2.44 X 100 shares followed by 2.45 X100, 2.47 X100, 2.48 X100 and ECN - 2.50 X 600)

That will depend on which MM get's the "market order". MM may fill order from inventory at something near the inside. MM may know of another MM that is looking to do more than 100 share business and fill that way. MM may take out the two MMs, hit the Island ECN order and take it out (eating the 200 shares for the moment). Now of course, the inside ask is 2.44 and he can fill the 1000 market order out of inventory at about 2.48 (the average of the next 1000 shares) and make a Benji on the deal.

There are a thousand other posibilities as well.

JB

 

[m_c_a98]

Originally posted by yukon_cornelius
sallyboy,

Thanks for the info, but I still don't follow.

Suppose that two market makers have asks of 100 shares each at 2.35 and 2.36. I have an ask on the Island at 2.37 for 1000 shares. Then some guy comes along and places a market order for 1000 shares. What happens?

It depends on if he directly routes his market order through ISLD. If he does he should buy your 1000 shares. If he places the order through a regular broker/online he probably won't buy your shares depending on the Market makers discretion and intentions.(and his brokers routing process)

 

[Turok]

>It depends on if he directly routes his
>market order through ISLD.

Just for the record M_c, Island doesn't accept Market Orders so that option isn't available.

JB

 

[m_c_a98]

I was thinking of my broker and others that give you island "market" orders by bidding a lot higher than lowest offer(buys) and offering a lot lower than highest bid(sells).

 

[Turok]

>I was thinking of my broker and others that
>give you island "market" orders by bidding a
>lot higher than lowest offer(buys) and offering
>a lot lower than highest bid(sells).

No offense, but limit orders transmitted to Island with a limit set "a lot higher/lower" than the inside are not market orders and don't offer the same execution assurance as market orders. You could place a limit order on Island a full buck above the inside and still conceivably not get filled.

By definition:

a market order will take out all available liquidity (via the route chosen) until the X shares are filled.

a limit oder will take out all available liquidity (via the route chosen) within the set price limit.

Your broker may be accepting a "market" order from you and through actively working one or more limit orders may be filling it on island, but one can't "directly route market orders to island".

Not trying to educate you as I'm sure you already know this, but I do want to make sure that other thread participants who may not be as experienced as you get the same opportunity.

JB