Limit orders

speculatus · Sep 16, 2007

Quote from trom:

Thanks. This is good to know.

Happen to have a link?

http://www.nasdaqtrader.com/trader/tradingservices/specsinstallguides/inet_fix1.0.pdf

Every exchange/ECN has it's own "version" of FIX protocol, there are so many variations in it. What forks for one may not work for another exchange...

Frankly speaking, I'm trying to minimize usage of limit orders. When there are news in a stock, a market order is the only way to get aboard quickly, otherwise a marketable limit order (say target price + $0.05 ) does the job just fine. Chasing the market by using limit orders is algo's job (and even those guys give up at some point and start hitting bids/taking offers).

ProgrammerGuy · Sep 16, 2007

Quote from speculatus:
Chasing the market by using limit orders is algo's job (and even those guys give up at some point and start hitting bids/taking offers). [/B]

I agree with this statement, only if you know you'll want to entry in, in the current moment. Then it's best to enter at market. However if you know you want to enter in at a specific price in the future it's best to send a limit order, because then there'll be a good chance you'll be up further up in the queue.

jimrockford · Sep 17, 2007

Quote from speculatus:

I think the right sentence is "floor traders used to step in...". Specialists violated exchange rules and PPY by allowing floor brokers to front-run customer orders.

There is no chance to do this in NYSE Hybrid anymore - even during the slow market specialists have to step in and provide liquidity by establishing new quotes. The fast market is fully automated.

No, your info is wrong.

Exchange rules did, and still do, allow floor traders sometimes to step in front of older public customer orders at the same price. Your comment about NYSE Hybrid just isn't correct. Take a look at NYSE rule 72. The specialists do not solve this problem by providing liquidity.

speculatus · Sep 17, 2007

Quote from jimrockford:

No, your info is wrong.

Exchange rules did, and still do, allow floor traders sometimes to step in front of older public customer orders at the same price. Your comment about NYSE Hybrid just isn't correct. Take a look at NYSE rule 72. The specialists do not solve this problem by providing liquidity.

You are talking about cross orders. They are not taking/providing liquidity per se. Furthermore, the floor broker has to flash the quotes for the cross, and another interesting broker may provide price improvement to the cross, but only by taking all existing liquidity at that price (because of the priority). And BTW, the specialist has "nothing" to do in this case.

So please explain me where the poor customer gets hurt here.

jimrockford · Sep 17, 2007

Quote from speculatus:

You are talking about cross orders. They are not taking/providing liquidity per se. Furthermore, the floor broker has to flash the quotes for the cross, and another interesting broker may provide price improvement to the cross, but only by taking all existing liquidity at that price (because of the priority). And BTW, the specialist has "nothing" to do in this case.

So please explain me where the poor customer gets hurt here.

No, I am not talking about cross orders.

The customer gets hurt when a floor broker is allowed, by exchange rules, to step in front of older public customer orders at the same price. Exchange rules have traditionally made it perfectly legal for floor brokers to front-run the specialist's public customer limit order book, in certain situations. If you understand why front-running hurts the customer, then you are well on your way to understanding how this situation hurts the customer who is not represented by a floor broker. I think it might also help if you would read exchange rules.

speculatus · Sep 17, 2007

Quote from jimrockford:

No, I am not talking about cross orders.

The customer gets hurt when a floor broker is allowed, by exchange rules, to step in front of older public customer orders at the same price. Exchange rules have traditionally made it perfectly legal for floor brokers to front-run the specialist's public customer limit order book, in certain situations. If you understand why front-running hurts the customer, then you are well on your way to understanding how this situation hurts the customer who is not represented by a floor broker. I think it might also help if you would read exchange rules.

I did and do read NYSE rules a lot since this is the only exchange I trade on, and I have to know how the exchange works and what the rules are.

I perfectly know that specialists used to step in and trade ahead of customer orders thus violating the exchange rules (and get fined by doing so). I just don't see in the rules any legitimate case when it's allowed. And again, with Hybrid specialists have little to do in the fast market.

I'd be very thankful to you if show me any rule (or any situation as you stated) that allows front-running.

jimrockford · Sep 17, 2007

Quote from speculatus:

I did and do read NYSE rules a lot since this is the only exchange I trade on, and I have to know how the exchange works and what the rules are.

I perfectly know that specialists used to step in and trade ahead of customer orders thus violating the exchange rules (and get fined by doing so). I just don't see in the rules any legitimate case when it's allowed. And again, with Hybrid specialists have little to do in the fast market.

I'd be very thankful to you if show me any rule (or any situation as you stated) that allows front-running.

I keep talking about legal front-running by floor brokers, and you keep talking about unlawful front-running by specialists. I am starting to think that you don't know the difference between a specialist and a floor broker. Do you know?

NYSE Rule 72 allows limited front-running by floor brokers (but not specialists) against public customer limit orders.

speculatus · Sep 17, 2007

Quote from jimrockford:

I keep talking about legal front-running by floor brokers, and you keep talking about unlawful front-running by specialists. I am starting to think that you don't know the difference between a specialist and a floor broker. Do you know?

Yes I do know.

NYSE Rule 72 allows limited front-running by floor brokers (but not specialists) against public customer limit orders.

More...

And how the customer can be hurt from this front-running (in this case "front-crossing")?

syrre · Sep 17, 2007

Quote from speculatus:

I'm not a FIX expert, but I know that INET allows you to reduce the order quantity of a limit order without loosing the time priority.

Yes, amending volume down I know of but thats not exactly the same as cancelling

Don Bright · Sep 17, 2007

I've posted these exceptions to Hybrid executions before, but they may help in this discussion as well. Basically on the Specialist part (you're all getting closer to the Floor Broker rules, it seems).

Don