A market sell order can execute against a market buy order. If the spread is only one penny, then somebody has to get lucky, and will see his market sell execute at the offer, or his market buy execute at the bid. One of our two contestants must get lucky, when their two market orders are matched within a penny spread.
Observations on the NYSE specialist.
- Thread starter oliver777
- Start date
trying to time this would be damn near impossible though, if he has all these orders and the spread is 1 cent and it is not going through either side why woluldnt he just match them to whatever bid/ask is our there this makes no sense to me why he would try to group these together when he can just send market sell orders to the bid and markey buy to the offer
No, all of the mkt orders will execute on the opposing side of quote, unless it is about to trade through the side it is coming from, and even then it likely won't since the spec likes to make the spread when he can.
By the way Rockford, this thread has gotten pretty popular, maybe we ought to turn it into a show... like Hannity & Colmes.
I think the answer may be that it is one of the fundamental duties of the specialist to get you the best possible price on your order. If he has a bunch of market sells, and a bunch of market buys, all at the same time, and he hits every market buy on the ask, and he hits every market sell on the bid, then he is not giving his public customers the best possible prices. A strategy for giving the best possible prices, when there are tons of market orders on both sides, is to try to bunch large numbers of trades on just one price, either the bid, or the ask, based on which way the order flow is pointing, instead of ping-ponging back and forth on every trade, depending on whether the next incoming order is a buy or a sell. It seems to me that you keep thinking of the NYSE like an ECN. I think I am trying to show various ways in which NYSE is different.
A lot of what I am saying is guesswork on my part. I'm not really sure about it. But my gut tells me I am probably correct in most, if not all, of what I have said. I think cstu could obviously answer with far greater confidence.
And nobody suggested that you would be able to time the type of order matching I am talking about. One of the greatest disadvantages of NYSE trading is that you can't precisely time things. If you want to time things precisely, then you need to do what I do, and strictly avoid manual executions by specialists, and tolerate only immediate, automatic, electronic executions by ECNs and Nasdaq.
Dan,
another piece of advice.
People who express a great deal of certainty in their opinions sometimes know less than people who aren't so sure about everything.
I would also advise you to read very carefully the entire part of the thread, dealing with your execution problem, if you haven't already done so, and notice how the debate shifted over time. I think this would add to your insight about who and what to believe.
another piece of advice.
People who express a great deal of certainty in their opinions sometimes know less than people who aren't so sure about everything.
I would also advise you to read very carefully the entire part of the thread, dealing with your execution problem, if you haven't already done so, and notice how the debate shifted over time. I think this would add to your insight about who and what to believe.
You seem rather certain in regards to this statement this is like the twighlight zone what the hell do i do now?
just joking
thx for all the help, Jim, and also to you hamlet, and everyone else who participated in this thread so far.
-Dan
Dan,
here is another way of expressing why I believe that market orders do not always automatically pay the spread on NYSE. It is based on priority.
If a bunch of marketable buys and a bunch of marketable sells arrive close in time, they can't all execute against the bid and offer, because market orders have priority. If your market buy can be matched with a market sell, then the two must be matched before any limit orders can participate. Otherwise, a limit order would be getting priority over a market order. This is why I think a market sell order can step in front of the offer, yet sometimes still execute at the offer, if it matches with a market buy or with a buy limit order priced at the ask.
It has been claimed in this thread that a market buy (sell) never executes at the bid (ask) unless the spread is about to tick in that direction. Perhaps this is true most of the time, but that your experience with the partial fill, which we have been discussing, is the exception that proves that the opposite can happen sometimes, too.
The only other explanations we have been offered do not fit the facts. Our former specialist assures us, and the NYSE rules confirm, that longs do not take priority over shorts; so this explanation doesn't work. Our former specialist assures us that floor brokers stepping in front of the specialist book, on the basis of size priority, are either very rare or impossible; and we are waiting for him to clarify which of those two he really intended to express, rare or impossible, because his words can be taken both ways. The idea of floor brokers asserting parity with the specialist's quote representing your order doesn't seem to fit the facts, since you got such a tiny proportion of the volume traded at your price after your partial fill.
I think that there are numerous people on this website who know more about this than either me or Hamlet, and its disappointing that they are not participating. I hope cstu will come back soon and enlighten us. I really appreciate learning from him.
here is another way of expressing why I believe that market orders do not always automatically pay the spread on NYSE. It is based on priority.
If a bunch of marketable buys and a bunch of marketable sells arrive close in time, they can't all execute against the bid and offer, because market orders have priority. If your market buy can be matched with a market sell, then the two must be matched before any limit orders can participate. Otherwise, a limit order would be getting priority over a market order. This is why I think a market sell order can step in front of the offer, yet sometimes still execute at the offer, if it matches with a market buy or with a buy limit order priced at the ask.
It has been claimed in this thread that a market buy (sell) never executes at the bid (ask) unless the spread is about to tick in that direction. Perhaps this is true most of the time, but that your experience with the partial fill, which we have been discussing, is the exception that proves that the opposite can happen sometimes, too.
The only other explanations we have been offered do not fit the facts. Our former specialist assures us, and the NYSE rules confirm, that longs do not take priority over shorts; so this explanation doesn't work. Our former specialist assures us that floor brokers stepping in front of the specialist book, on the basis of size priority, are either very rare or impossible; and we are waiting for him to clarify which of those two he really intended to express, rare or impossible, because his words can be taken both ways. The idea of floor brokers asserting parity with the specialist's quote representing your order doesn't seem to fit the facts, since you got such a tiny proportion of the volume traded at your price after your partial fill.
I think that there are numerous people on this website who know more about this than either me or Hamlet, and its disappointing that they are not participating. I hope cstu will come back soon and enlighten us. I really appreciate learning from him.
LOL- Dan you are very astute. Keep that open mind. As someone who is swinging some decent size positions around, I am sure that you have already learned the very important trading lesson of always being willing to admit that you are wrong. I have seen hundreds of times where stubbornness and ego in that regard has led to someone's downfall. You might have seen it too.
As far as taking advice from people, remember the old adage - those that can - do, and those that can't - teach (or try to). Keep that in mind when seeking advice in this business. Make sure that the people that you are listening to actually have some real relevant experience doing the same kinds of things that they are giving you advice on, and much more importantly, are successful at it. You seem intelligent enough to know what you will become when you model mediocrity, or worse, failures.
Good lucking trading on the NYSE!
Dan,
Nothing I have said in this thread, about specialists, should be taken as advice on how to trade profitably with specialists. My statements, in this thread, were instead intended to further the education of both myself, and others, as to reasons supporting (or detracting from) my beliefs that traders should focus on developing trading strategies and skills which will survive after the specialists are gone, and that investing yourself in development of strategies and skills depending upon specialist system inefficiencies is a poor investment. I certainly acknowledge that many people know how to trade the specialist system very profitably. My advice is to seek more survivable ways to trade. This is why I no longer trade with specialists.
One of the problems with the specialist system is that it throws up smokescreens so that people cannot understand what is happening to the property they entrust to specialists on every trade. The rules are extremely complex and poorly written. Our former specialist has revealed that in reality, actual practices on the exchange floor are dominated by various undisclosed, unwritten customs and traditions in conflict with the written rules. Exchange public relations materials are extremely misleading, and contradict both the rules and the actual floor practices.
A good example would be that of price-time priority. Many, if not most traders, believe that everything at NYSE is strict price-time priority. If you go to the NYSE website, you will see such claims throughout the website, and I don't think you will find anything to the contrary, other than the NYSE rules. The rules, however, are written in such a way that the average person would never be able to figure out that the rules do not provide price-time priority. The real truth is that only the specialist book of public customer limit orders internally operates on a price-time priority basis. The specialist, while treating the book as though it were one big customer, represents that book in a floor auction which is decidedly not governed by price-time priority. The floor auction allows floor brokers to bid or to offer, and to execute, at the same price, in front of older specialist book orders, thus undermining price-time priority. I'm not certain, but I think every single voice then on this thread claimed I was wrong when I revealed this lack of true price-time priority, until well after cstu, the former NYSE specialist, confirmed that I was correct.
I think Avid Consumer made a very important point, when he wrote:
These various weaknesses of process provide camouflage for organized criminal activity and corruption. One of the responses made, to the Washington Post article I posted about criminal prosecutions against specialists, is that just because there are some bad apples, doesn't mean the whole system is bad. If, however, you read the article carefully, you will see that according to the government, the problem is not limited to individual specialists, and that the exchange systems for regulating and policing them are also corrupt and are part of the scam. Cstu, in another thread, very honestly acknowledged this problem of dirty exchange cops. A great deal of widely available published material is available to support this viewpoint, and I'm sure many traders know about it from first-hand experience. Lucky Luciano, after visiting the NYSE floor, remarked: "I joined the wrong mob!"
Keep in mind that even when the NYSE game is played by the rules, the lack of true price-time priority makes it a bonanza for floor traders engaged in legalized frontrunning of orders entrusted to specialists.
I would make the converse argument: I would say that just because the system is rotten to the core, doesn't mean that all specialists are bad. Our former specialist, cstu, I think has been very honest and helpful to us, while asking nothing in return, and I like to think he was one of the good guys, even back in the days when he was a specialist.
I am suspicious about the developing NYSE Hybrid System. I think that NYSE has such an extensive history of deception, as to how its own processes and rules operate, that we can never be sure we are being told the truth about how the hybrid system really operates, and that it will be designed to contain secret opportunities for systematic cheating, stealing, and fraud. I think the Hybrid will be just one more phase in the evolution of our nation's longest-running shell game. I will close, on this point, by quoting the Godfather, Part II:
Nothing I have said in this thread, about specialists, should be taken as advice on how to trade profitably with specialists. My statements, in this thread, were instead intended to further the education of both myself, and others, as to reasons supporting (or detracting from) my beliefs that traders should focus on developing trading strategies and skills which will survive after the specialists are gone, and that investing yourself in development of strategies and skills depending upon specialist system inefficiencies is a poor investment. I certainly acknowledge that many people know how to trade the specialist system very profitably. My advice is to seek more survivable ways to trade. This is why I no longer trade with specialists.
One of the problems with the specialist system is that it throws up smokescreens so that people cannot understand what is happening to the property they entrust to specialists on every trade. The rules are extremely complex and poorly written. Our former specialist has revealed that in reality, actual practices on the exchange floor are dominated by various undisclosed, unwritten customs and traditions in conflict with the written rules. Exchange public relations materials are extremely misleading, and contradict both the rules and the actual floor practices.
A good example would be that of price-time priority. Many, if not most traders, believe that everything at NYSE is strict price-time priority. If you go to the NYSE website, you will see such claims throughout the website, and I don't think you will find anything to the contrary, other than the NYSE rules. The rules, however, are written in such a way that the average person would never be able to figure out that the rules do not provide price-time priority. The real truth is that only the specialist book of public customer limit orders internally operates on a price-time priority basis. The specialist, while treating the book as though it were one big customer, represents that book in a floor auction which is decidedly not governed by price-time priority. The floor auction allows floor brokers to bid or to offer, and to execute, at the same price, in front of older specialist book orders, thus undermining price-time priority. I'm not certain, but I think every single voice then on this thread claimed I was wrong when I revealed this lack of true price-time priority, until well after cstu, the former NYSE specialist, confirmed that I was correct.
I think Avid Consumer made a very important point, when he wrote:
These various weaknesses of process provide camouflage for organized criminal activity and corruption. One of the responses made, to the Washington Post article I posted about criminal prosecutions against specialists, is that just because there are some bad apples, doesn't mean the whole system is bad. If, however, you read the article carefully, you will see that according to the government, the problem is not limited to individual specialists, and that the exchange systems for regulating and policing them are also corrupt and are part of the scam. Cstu, in another thread, very honestly acknowledged this problem of dirty exchange cops. A great deal of widely available published material is available to support this viewpoint, and I'm sure many traders know about it from first-hand experience. Lucky Luciano, after visiting the NYSE floor, remarked: "I joined the wrong mob!"
Keep in mind that even when the NYSE game is played by the rules, the lack of true price-time priority makes it a bonanza for floor traders engaged in legalized frontrunning of orders entrusted to specialists.
I would make the converse argument: I would say that just because the system is rotten to the core, doesn't mean that all specialists are bad. Our former specialist, cstu, I think has been very honest and helpful to us, while asking nothing in return, and I like to think he was one of the good guys, even back in the days when he was a specialist.
I am suspicious about the developing NYSE Hybrid System. I think that NYSE has such an extensive history of deception, as to how its own processes and rules operate, that we can never be sure we are being told the truth about how the hybrid system really operates, and that it will be designed to contain secret opportunities for systematic cheating, stealing, and fraud. I think the Hybrid will be just one more phase in the evolution of our nation's longest-running shell game. I will close, on this point, by quoting the Godfather, Part II: