Nasdaq's ELO orders

Chuck Krug

Chuck Krug

Nasdaq is proposing to offer a new Order Attribute that will allow certain Displayed Orders to have priority ahead of other resting Displayed Orders on the Nasdaq Book at the same price. To receive this priority, an Order must be designated with the Order Attribute “Extended Life Priority” (“ELO”) to indicate that the Order will not be altered or canceled by the member before the minimum resting time has elapsed.

http://blog.themistrading.com/2016/11/nasdaqs-extended-life-bait-and-switch-order/
 
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I like it. That essentially means that if an HFT system and a retail trader both enter an order at the exact same price, the ELO attribute of the retail order means it would be executed before the HFT order, even if the HFT order was entered first. Pretty slick IMO.
 
Baron said:
I like it. That essentially means that if an HFT system and a retail trader both enter an order at the exact same price, the ELO attribute of the retail order means it would be executed before the HFT order, even if the HFT order was entered first. Pretty slick IMO.
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Except that anytime someone posts one of these orders the HFT will queue up a penny ahead knowing that you are unlikely to cancel anytime soon. I'm excited to try it either way, but fearful the HFT will front run.
 
Dustin said:
Except that anytime someone posts one of these orders the HFT will queue up a penny ahead knowing that you are unlikely to cancel anytime soon. I'm excited to try it either way, but fearful the HFT will front run.
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I was thinking the exact same thing. But a penny to them is everything.
 
Dustin said:
Except that anytime someone posts one of these orders the HFT will queue up a penny ahead knowing that you are unlikely to cancel anytime soon. I'm excited to try it either way, but fearful the HFT will front run.
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It seems like this new order type won't actually help much because of what you say. But I don't see it hurting retail orders either.
 
Dustin said:
Except that anytime someone posts one of these orders the HFT will queue up a penny ahead knowing that you are unlikely to cancel anytime soon. I'm excited to try it either way, but fearful the HFT will front run.
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Yeah, but keep in mind that "anytime soon" as you stated is only one second, and also consider that the raised HFT bid really just tightens up the spread and creates a more competitive marketplace, which is exactly what NASDAQ wants. And not only that, but if a retail order ALSO quotes a penny ahead like the HFT did then it makes the raised HFT bid basically obsolete because of the ELO priority on the retail order. We can go back and forth on this scenario ad nauseum but the bottom line is that NASDAQ is trying to prioritize legit retail orders over bullshit HFT orders which can only be a good thing for the overall market.
 
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If Nasdaq really cared about the quality of the market then they would eliminate the unique identifier attached to these orders and not require anything in return for the enhanced queue position.

This sums it all up. I got excited at first only to realize it's just a way for them to earn more by pretending to level the playing field.
The fact that HFT knows that I'm the slowest order gives them a big edge over me and they will plan accordingly.
 
d08 said:
If Nasdaq really cared about the quality of the market then they would eliminate the unique identifier attached to these orders and not require anything in return for the enhanced queue position.

This sums it all up. I got excited at first only to realize it's just a way for them to earn more by pretending to level the playing field.
The fact that HFT knows that I'm the slowest order gives them a big edge over me and they will plan accordingly.
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HFT can earn more for all I care as long as it doesn't affect my fill rates. Even Nasdaq doesn't know at this point how it will work so we'll see.
 
Dustin said:
HFT can earn more for all I care as long as it doesn't affect my fill rates. Even Nasdaq doesn't know at this point how it will work so we'll see.
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I can't imagine they'd cannibalize each other, at least not on purpose. It must mean they earn from mutual funds and retail. I don't have a problem with HFT either unless they cause bad fills for myself.
 
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