Observations on the NYSE specialist.

[Don Bright]

Regarding market vs. limit orders on the NYSE.

We teach to enter limit buy with a price above the NBBO offer and sells below the NBBO bid price, for quicker execution (knowing tha we will get "price improvement" most of the time.

We do this because the "clerk" or "assistant" can execute limit orders, and simply click to fill the order. They cannot execute Market orders, only the Specialist can. The Specialist may "batch" the market orders or "match" whenever possible...this may take a bit longer to get executed.

Just a comment based on the rules.

All the best,

Don

 

[Hamlet]

Dan - are you hanging in there buddy? Don't let your head spin, LOL - It's a lot less complicated than it sounds if things are not explained properly, or presented with a bias. I'm sorry I can't do justice to giving you any more helpful NYSE related advice other than that right now. I do have a "day-job", so instead of just "talking the talk", I need to do some "walking of the walk" for now, but I'll do some talking later after mkt hours.

Good Luck.

 

[jimrockford]

Quote from Don Bright:

Regarding market vs. limit orders on the NYSE.

We teach to enter limit buy with a price above the NBBO offer and sells below the NBBO bid price, for quicker execution (knowing tha we will get "price improvement" most of the time.

We do this because the "clerk" or "assistant" can execute limit orders, and simply click to fill the order. They cannot execute Market orders, only the Specialist can. The Specialist may "batch" the market orders or "match" whenever possible...this may take a bit longer to get executed.

Just a comment based on the rules.

All the best,

Don

Don,

do you think it would be accurate to say that, on the one hand, processing of market orders can be delayed compared to limit orders, for the reason you describe; but that once market orders pass through this delayed processing, and are subsequently ready to be matched by the specialist, his order matching process then treats them with a higher priority than any limit orders reaching him and being matched at roughly the same time? Or is it different from what I just said?

Would it be accurate to say that you teach use of the marketable limit order, because its inferior priority, in the order matching process, is outweighed by the fact that it reaches the order matching process more quickly, on average, than does the average market order?

(P.S. I'm not disagreeing with you, I'm just trying to add a wrinkle of detail to what you said.)

 

[jimrockford]

Don,

I also wanted to add the following questions:

Is it true that a NYSE market order can sometimes step in front of a limit order, thereby executing at the price of the limit order, and thereby also delaying or preventing any fill of the limit order?

Do you agree with those who have so vociferously claimed, on this thread, that long sells have NYSE priority over short sells (I don't agree)?

What do you think happened to Dan's partially filled short sell order?

 

[Hamlet]

Quote from jimrockford:

Do you agree with those who have so vociferously claimed, on this thread, that long sells have NYSE priority over short sells (I don't agree)?

What do you think happened to Dan's partially filled short sell order?

I must point out here (in keeping us all honest) that I have not seen anyone "so vociferously" claim that long sells can have priority over shorts. Perhaps Rockford has honestly mistaken the exact definition of the word, but whatever the case I wanted to make that clear.

What I had said, as did another poster, is that I am relatively certain that long sales are given priority over short sales. This statement was made on our parts based on our real-world experiences. In my case that experience is extensive, and I also remember reading it somewhere some years ago however I have not been able to find anything hard to post on it here. A third person on the thread also spoke in the affirmative on this but a fourth (who claimed to be an ex-specialist) said that it was not the case. For that reason, I clearly said multiple times (please reference my posts) that I am willing to leave this open to debate.

I'd also like to call a challenge to participants of this thread to speak of the facts as they are and to be as honest and straightforward as I have tried to be when it comes to issues that they cannot readily confirm.

With all that being said, I look forward to seeing if someone can provide some hard evidence on this issue one way or the other.

 

[Don Bright]

Long sales have priority over short sales. We often have traders with short sale orders on the opening who get partial or no fills when their limit price matches exactly with the opening price.

Don

 

[Hamlet]

Quote from Don Bright:

Long sales have priority over short sales. We often have traders with short sale orders on the opening who get partial or no fills when their limit price matches exactly with the opening price.

Don

Thank you for clearing that up for us Don. I was pretty certain that this was the case, based on my experience, but since I was repeatedly challenged on this and could not show a link or point to any rule that confirmed it, I did not want to be accused of blowing hot air by the "speculators of the truth" on this thread.

Is this written anywhere?

 

[jimrockford]

Quote from Don Bright:

Long sales have priority over short sales. We often have traders with short sale orders on the opening who get partial or no fills when their limit price matches exactly with the opening price.

Don

Don,

This situation certainly is a toughie for us, because our former specialist in this thread, cstu, says that long sells have no priority over short sells.

Your second sentence seems to be offered as evidence supporting your first sentence. I don't see how your second sentence supports your first sentence. It seems to me that what you describe in your second sentence could easily happen regardless of whether longs have priority over shorts. Do you agree, or can you explain?

Do you believe long sales take priority over short sales only in the specialist limit order book, or only in the trading crowd's floor auction, or both?

Can you explain, how do you know, or how do you believe you know, that long sales take priority over short sales?

Is this rule of priority in the written NYSE rules? If so, which rule? If not, then why not?

Do you believe that long sales take priority over short sales only on the opening print? Or all day long as well?

P.S. It is good to see you back on this thread.

 

[alanm]

Quote from Don Bright:
Long sales have priority over short sales. We often have traders with short sale orders on the opening who get partial or no fills when their limit price matches exactly with the opening price.

Hmmm. The previous common wisdom was that any market order or limit order whose price was marketable at the opening price would receive a complete fill unless it was a short-sale for a stock that was subject to the uptick rule, and the print was not a 0-plus tick from the last NYSE print.

Now we are adding the exception that not all short-sales must be filled, even if they are marketable and tick-qualified?

Does it matter whether it's an OPG order or not?

Are there specific reasons why the spec can choose to not fill such an order, like he would have to take the other side, and does not have to do so for a short-sale?

Can he do this during the day, too, with marketable short-sale orders - just ignore them?

Any cites?

Jim: I, too, would like to see the actual explanation of the particular trade being discussed, or something like it. I think participation is lacking because the thread turned into a flame war for a few pages and anyone that cared lost track of the original point (and didn't care to figure it out again ). Perhaps an accurate example summary of the trade to get it back on track...

There are also very few people that have the knowledge required to explain floor rules correctly, and they seem to be here already.

 

[Hamlet]

Quote from jimrockford:

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.

What do you define as the "average person"?

The average person could not figue out how to program their vcr.

The average person earns a relatively pitiful wage working for the man.