Listed Stock Trading

Leland,

I've got no answer for you regarding shorts as I trade strickly Nas. Since I'm considering dabbling in listed I've got a question about one of your previous posts:

I used to do that too but I have found that I often get filled on a at a better price using a regular market order. If you enter a limit order at .20 over the offer and I enter a market order at the same time guess who's order gets filled first

I think you were implying that your market order would get filled first, but it seems that it would be in the best interest of the specialist to fill the limit order .20 over the offer? If he's got 2 minutes (max) to get to your market order why wouldn't he sell to the other guy for the higher price first? Then, if he upticks during those 2 min he can sell to your market order at a higher price too?

As I said, I'm not real familiar with listed transactions so please fill me in. Thanks.
 
Magna,

As far as I know market orders get first dips for listed stocks (at least that is my understanding). Thats the point I was trying to make.

Leland
 
Leland,

As far as I know market orders get first dips for listed stocks (at least that is my understanding)

Thanks for your answer. Does anyone know if this is true, that the specialist either does (or has to) give priority to a market order over a limit order when the limit order, say on a buy, is above the ask. It sure would seem like he'd rather give preference to the limit order since he call sell for higher, but maybe he's not allowed to??
 
I see a purpose for both limit & market orders and it really depends on market conditions. As I've mentioned, sometimes the specialists really mess with the spread and I'm a little concerned about being on the wrong end of that. All of a sudden, you'll see the specialist move .50, .80, or 1.00 out of nowhere. I'm not sure if it's a ploy to trigger stops or what, but it's not always good. So with a marketable limit order you can control the execution a bit. But "pennying" the specialist often doesn't work. They usually just penny you right back!
 
sallyboy,

But "pennying" the specialist often doesn't work. They usually just penny you right back!

Not sure I follow you (sorry, I'm so used to MM's and ECN's, not listed trading). I assume you mean by pennying the specialist you're putting a buy-long limit order .01 above the ask? Don't understand why that would bother him since he's at least getting his ask. Now if you mean putting your buy-long limit order .01 below the ask, then I could see how it might ever-so slightly annoy him (since you're not anteing up his full requested price), but hell, you're not trying to buy at the bid so I can't see how he would be that bothered. Now if you mean putting a buy-long limit order .01 above the bid, then I can see how you might ruffle his feathers. Anyway, what did you mean by "they usually penny you right back"?
 
Magna:

Yes, a market order always has preference over any limit order on the NYSE, even if the limit is more than the bid/ask. The specialist cannot give priority to any other order over a market order. If a stock is liquid enough though, and you enter a limit order above the ask (or below the bid) it probably won't make much difference as the specialist is no more likely to screw you than usual. Remember that one of the most important roles of the specialist is to provide a fair and orderly market. If you buy 1,000 shares of XYZ, chances are it's from another seller, not the specialist's inventory. Therefor the specialist won't favor the buyer or the seller. Those times when you do get a horrible execution (and we've all experienced that) is when the specialist is selling from inventory, or when the liquidity has dried up, and there's not much you can do about that.

As far as which type of order is better really depends on how much you want a postion in the stock at that very moment and what you're looking to get out of it.

DeeMan
 
Magna,

I mentioned that I often use marketable limit orders, but if you just offset by a penny or two, the specialist may move around you. For example, you want to sell 500 ABC; the bid is 45.47. I have found that if you placed an order to sell 500 ABC @ 45.45, the specialist may drop to 45.43 or 45.44, leaving your order unexecuted. Then you either have to wait it out and hope your order gets executed or cancel and lower your price and possibly chase it. So, in this example I might place an order to sell at 45.30 or 45.35. In other words, something that is likely to get executed, but still allows me to control slippage.
 
Thanks DeeMan and sallyboy for clearing up those two points -- it's all starting to fall into place. But damn it's so bloody different than the Nas, almost takes an entirely alternate mindset (or as RiffRaff said in The Rocky Horror Picture Show, "with a bit of a mind flip"). Seems like it would be tough to effectively daytrade both markets, but I suppose over time you get used to the quirks of each.
 
i did some tests trading AOL and found virtually no difference between a market order and a "marketable" limit order. Both orders were always filled at the same price and within a second of each other.

ofc, this isn't really a scientific study but it's the same as I experience in real life.

One thing I've heard is that the clerk can fill a limit order right away and that sometimes the specialist will hold a few market orders and batch them all at once.

fletch
 
One thing I've heard is that the clerk can fill a limit order right away and that sometimes the specialist will hold a few market orders and batch them all at once.


That's my understanding as well. As of late, I almost always use limit orders for the reason you listed, for one. I have no "proof" that one is faster than the other, just that limit orders seem to be a little faster for the issues I trade.
 
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