Jim you are seeing the worst of NYSE trading with SPY. I set up a program to arb NY trade-throughs with ECN's a couple years ago. I figured if NY is constantly printing outside the inside ECN market there must be some money there. The problem was that the program needed to adjust the envelope constantly, and NY wouldn't let you cancel when he wanted to fill you (the market was moving against you), and he would skip over your order when there was a good fill. If there was ever a crooked specialist imo it's the SPY guy.
Observations on the NYSE specialist.
- Thread starter oliver777
- Start date
=============Quote from Don Bright:/Fred Bloggs
Darn those bulls, LOL. Same wankers that ran my short EP up this morning....
Don
It wasnt me;
dont like to go long weakest stocks lik EP in that gapped sector.
And speaking of LOL, thats funny some dont seem to care about the slippage in a nice liquid stock like GOOG.
Actually the slippage in GOOG is pretty reasonable for NasdaQQQQ.
Don,
your test is not valid. The problem I am talking about occurs when the market is trending away form your order. If you submitted your orders at those times, when the market is trending, when traders most urgently want to trade, and if you submitted more than just a couple of orders, then you would see that routing SPY orders to NYSE is a huge ripoff compared to the prices available on ECNs.
NYSE deceptively baits traders and smart-router software to route SPY orders to NYSE. NYSE does this by falsely displaying the best price in a trending market. But then NYSE, on average, gives a much worse price than the one it displayed. The average difference is so great, that one would be far better off simply excluding NYSE from routing decisions for SPY orders. I speak from experience and careful study and analysis.
The thing that makes SPY different from other securities is that SPY has so much liquidity on ECNs and on Nasdaq's SuperIntermarket. These fully electronic liquidity pools serve as a benchmark proving that NYSE is robbing customers blind on their SPY orders. You, Don, are the foremost expert and defender of NYSE trading on Elitetrader, and yet, you seem unable to provide any alternative explanation to my own that NYSE is simply engaging in thievery on SPY orders.
Is there any reason to believe that NYSE is any more honest for securities other than SPY? I don't see any reason. I think it is just the opposite. Most securities do not have the same amount of alternative electronic liquidity sources enjoyed by SPY. This makes it even easier for NYSE to steal from customers, on securities other than SPY, because there is no benchmark making the theft as obvious as it is in the case of SPY. I think that the case of SPY demonstrates that NYSE does systematically steal from customers, and that the only thing special about SPY is that the tight markets available elsewhere make the thievery extremely obvious; whereas the thievery is much better camouflaged for most other securities, where we don't have a benchmark to make it obvious we are being fleeced.
Please do me a favor, and give me TOS from your message (order and fill) window, and a screenshot of the NYOB/L2...I will discuss this with the floor governor/GS executive....I've been watching all day, and have never seen more than 1 penny difference between the NYSE and any other liquidity pool.
Specialist simply have no reason to "steal" or "cheat" anyone... I admit that some are better than others, but remember, these guys are simply middle management for their firms...and get paid good salaries to execute orders...they prefer not to trade whenever possible. Back in the 1980's they traded quite a bit more.
In addition, I sent out 48 emails to my traders who trade more than 50,000 shares of SPY (on average) daily, and asked fro their opinion of how well they have their orders executed...10 responses only so far...all say it's not even a concern, because of the liquidity.....I'll let you know of any of my guys express the same concerns.
Back when there was an edge trading the QQQ, I would always resort to "wave" trading with the AMEX Specialists because of the time lapse involved...(no momentum trading so to speak)....simply because it took a few seconds for the orders to be taken off screens by the clerks....and this seemed to work well. When they dually listed the QQQ(and QQQQ), of course that edge went away.
Anyway, if you prefer simply trading on the ECN's, then please do so....every trader needs a "comfort level" at times.
(Let me know about those screen shots...we have until next Thursday)...
Thanks,
Don
(PS: I realize that our orders are routed differently, without the broker being involved, but there shouldn't be all that much difference)
Don said:
Retail orders are routed to the brokerage firm (IB in your case) by regulation, and therefore may not even make it directly to the NYSE (although it may show on your sheets that it traded there, it may have been simply "put on the tape" there)...your T&S will show NYSE, but it also may show "as of" - many variables involved in retail trading.
and
sure, I understand...and, no, IB may not be on the other side, but they can also "sell" order flow (check your contract, I've read IB's), and any delay could cause a price difference). If the trade is reported back to you in a few seconds, then you have to be filled within the NBBO price quotes, no matter what. Sometimes you are "matched" with another IB customer.
Don, all due respect, but every so often you bring up this FUD about retail orders being delayed, not routed where you think, internalized, etc., and it's simply false with respect to most direct-access brokers. I don't really understand why you keep doing it, because it's (even admittedly) not your particular area of expertise. It IS, however, the area of expertise for Jim, myself, and a number of other very active, professional, retail traders.
Like most direct-access platforms, when you enter an order in IB's TWS or via its API, you specify a value in the "Destination" field. The choices available generally include every destination at which a particular security can be traded, as well as "SMART", which goes to a "smart-routing" algorithm to make the decision. If you tell it to send the order to NYSE, it sends it to NYSE, period. No "ifs", "ands", "buts", or delays about it. Same applies to INET, ARCA, BRUT, or any other exchange to which they are connected.
I have first-hand knowledge that the same is true of Assent and MB Trading.
If you send the order to SMART at IB, you're allowing them to decide the routing automatically, and this includes matching against TMBR at the NBBO or better, which is all well-disclosed. The point is that it's your choice to do this or not. I've personally been in situations where I got a fill from TMBR in a market that was ripping badly against me, when there was no ECN liquidity, and the NYSE quote was non-firm (and subsequently gapped hard).
Also, I can guarantee you that there is zero difference between the way my retail orders are routed at Assent and those issued by their prop traders. They go to an order management server, are checked against risk-management params, and are routed to the appropriate destination, just like everyone else's.
I've been told that TMBR's proprietary trading orders are routed through the same type of systems (perhaps not the same physical boxes) as IB's retail orders.
I'd be happy to do a controlled speed test with you any time you like, involving sending/cancelling orders to INET and watching the timestamps of the resulting quotes. I'll do Assent and IB and you can do your platform and we'll publish the results.
Retail orders are routed to the brokerage firm (IB in your case) by regulation, and therefore may not even make it directly to the NYSE (although it may show on your sheets that it traded there, it may have been simply "put on the tape" there)...your T&S will show NYSE, but it also may show "as of" - many variables involved in retail trading.
and
sure, I understand...and, no, IB may not be on the other side, but they can also "sell" order flow (check your contract, I've read IB's), and any delay could cause a price difference). If the trade is reported back to you in a few seconds, then you have to be filled within the NBBO price quotes, no matter what. Sometimes you are "matched" with another IB customer.
Don, all due respect, but every so often you bring up this FUD about retail orders being delayed, not routed where you think, internalized, etc., and it's simply false with respect to most direct-access brokers. I don't really understand why you keep doing it, because it's (even admittedly) not your particular area of expertise. It IS, however, the area of expertise for Jim, myself, and a number of other very active, professional, retail traders.
Like most direct-access platforms, when you enter an order in IB's TWS or via its API, you specify a value in the "Destination" field. The choices available generally include every destination at which a particular security can be traded, as well as "SMART", which goes to a "smart-routing" algorithm to make the decision. If you tell it to send the order to NYSE, it sends it to NYSE, period. No "ifs", "ands", "buts", or delays about it. Same applies to INET, ARCA, BRUT, or any other exchange to which they are connected.
I have first-hand knowledge that the same is true of Assent and MB Trading.
If you send the order to SMART at IB, you're allowing them to decide the routing automatically, and this includes matching against TMBR at the NBBO or better, which is all well-disclosed. The point is that it's your choice to do this or not. I've personally been in situations where I got a fill from TMBR in a market that was ripping badly against me, when there was no ECN liquidity, and the NYSE quote was non-firm (and subsequently gapped hard).
Also, I can guarantee you that there is zero difference between the way my retail orders are routed at Assent and those issued by their prop traders. They go to an order management server, are checked against risk-management params, and are routed to the appropriate destination, just like everyone else's.
I've been told that TMBR's proprietary trading orders are routed through the same type of systems (perhaps not the same physical boxes) as IB's retail orders.
I'd be happy to do a controlled speed test with you any time you like, involving sending/cancelling orders to INET and watching the timestamps of the resulting quotes. I'll do Assent and IB and you can do your platform and we'll publish the results.
Don,
I don't have the data and screenshots you requested, because my NYSE SPY trades occurred well over a year ago. I also never bothered with NYSE open book. The S&P futures and ECNs are more important than NYSE open book, for somebody trading SPY.
Your comment about your watching SPY, and not seeing more than a penny difference between it and other liquidity pools, shows that you are not comprehending the problem. You cannot see what is happening by what you are watching. You must actually trade in order to see it.
If the market is moving against your SPY order, of course you will be filled promptly. If the market is moving favorably to your SPY order, then your order execution will frequently be delayed for a very long time, while the market runs away from your order, and then you will finally be executed at the much worse market price existing after this lengthy delay. If you simply exclude NYSE and AMEX from your SPY trading, then you will, on average, get much better prices, and will always get immediate execution.
You made the wrong comparison. You compared the NYSE price to the other prices quoted at a particular point in time. This is not valid. You need to compare the ECN prices instantly available at the time your order arrives at NYSE, to the execution price actually received at the much later when time NYSE finally gets around to executing your order. This is the crucial difference you are overlooking.
Another problem, in addition to the delay, is that NYSE will often take full advantage of the SEC's de minimis SPY exception to the trade-thru rule, with the result that you will suffer an additional 3 cent hose job, because you will trade-thru the NBBO - after the NBBO has already run away from you. And then yet another hose job is that sometimes, NYSE will go beyond the legal 3-cent limit, even though that does violate the trade-thru rule.
Thank you for soliciting opinions from your traders, but I'm not sure you did this in a way relevant to the problem. The problem I am describing involves orders which take liquidity. I suspect that your traders are offering liquidity, not taking it, so that their experience has little or no relevance. Can you clarify this question? If you do have traders taking liquidity, do they simply assume they are getting good executions, or do they carefully check the difference between the prices they could get immediately on ECNs, versus the delayed execution prices they actually get when executed on NYSE?
Alanm,
I think your posting raises an interesting point. It seems that Don is trying shift the blame for NYSE thievery away from NYSE, and onto the honest men and women at IB. I think that my responses, in this thread, have demonstrated that his efforts to blame IB have absolutely no merit, substance, or supporting evidence whatsoever.
Don,
it really amazes me that you would make such a statement. Please read the following newspaper article, and then tell me if you agree that it demolishes your argument.
great article Jim,
this thread was started as observations made over the last few months, however I wasn't aware there were arrests made early last year.
It's amazing that the specialist would still be up to the same shenanigans, you would think they would have learned or are we just that dumb to continue to do business with them when we have better markets such as the Nasdaq and ECN's.
Sure some specialists are better than others. But how we traders make this decision and why should we have to decide what day they play by the rules and what days they decide not to, I'd rather stick to the fairer markets (Nasdaq and ECN's).
So long NYSE.
this thread was started as observations made over the last few months, however I wasn't aware there were arrests made early last year.
It's amazing that the specialist would still be up to the same shenanigans, you would think they would have learned or are we just that dumb to continue to do business with them when we have better markets such as the Nasdaq and ECN's.
Sure some specialists are better than others. But how we traders make this decision and why should we have to decide what day they play by the rules and what days they decide not to, I'd rather stick to the fairer markets (Nasdaq and ECN's).
So long NYSE.