Observations on the NYSE specialist.

[cstu]

Still a lot of misinformation on this thread. I will try to answer this later but Don is not entirely correct but if it helps to clear anything up market sell orders do take precedence over limit on the opg and on the close. But the reasons are quite logical and different than what is being explained.

If we have some examples, I would be glad to explain. I will say though that the one price opg and close is perhaps the most fair aspect of the exchange so...

 

[jimrockford]

Quote from 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.

Alanm,

here is a rule which I think would be of interest to you, NYSE Rule 115A.20(2)b:

Market orders shall have precedence over limited orders at the opening or reopening of the market in a security. When the price on a limited price order is the same as the price at which the stock is to be opened or reopened, it may not be possible to execute a limited price order at such price.

This rule seems logical to me. If opening prices are selected so as to enable the greatest possible volume to execute on the open, but if an imbalance exists at that optimal price, then it seems reasonable that some limit orders, matching that price, will go unexecuted.

I'm doing my best to be accurate. I may be wrong about things. Cstu warns there is a lot of misinformation on this thread. I agree with him, but I hope I am not part of that misinformation! If I am, then I will look forward to his correcting me and educating me and everybody else.

 

[CowboyBlue]

sorry guys didnt get a chance to record any instances today although there were a few there was way too much volatilitiy and I was too busy making money will try to remember to do it tomorrow, thx again for the advice.

-Dan

 

[lescor]

Don, if you are making phone calls anyway... Can you quote the source of the oft-mentioned rule that if your opg order is in less than two minutes before the stock opens, you are not guaranteed an execution if the stock trades through your price.

It was mentioned previously in this thread by someone that that is not true, that you are entitled to a fill, even if your order is in one second before the stock opens. I searched the nyse rule book and couldn't find any reference to this two minute rule.

Thanks

Quote from Don Bright:

Also at the close for "MOC" orders.

Information Memo
... sell "short" at-the-close represented as "G" orders must yield priority, parity and ... been executed at a better price (and still satisfy the "short sale" rule in ...
http://apps.nyse.com/commdata/PubInfoMemos.nsf/0/85256FCB005...

Go to NYSE.com and search around, I'm heading home now, but if you can't find any more documentation, I'll make a phone call.

(Just for fun)...while you're at it, see if you can find what the priorities are for intraday execution. (Time (until you get any portion filled), and then you're on pariity with others at the same price, is my guess. Customer vs. Agency, etc.

Things do change, but this is still intact at this point in time.

All the best,

Don

 

[alanm]

Quote from cstu:

Still a lot of misinformation on this thread. I will try to answer this later but Don is not entirely correct but if it helps to clear anything up market sell orders do take precedence over limit on the opg and on the close. But the reasons are quite logical and different than what is being explained.

If we have some examples, I would be glad to explain. I will say though that the one price opg and close is perhaps the most fair aspect of the exchange so...

I don't get it. The single price implies to me that there is no precedence issue.

Take the short-sale out of the question and see if we can agree on this one:

Example 1:
6 different orders sent at 09:15 ET:

Buy 200 IBM MKT OPG
Buy 200 IBM MKT DAY
Buy 200 IBM LMT 82.00 OPG
Buy 200 IBM LMT 82.00 DAY
Buy 200 IBM LMT 83.00 OPG
Buy 200 IBM LMT 83.00 DAY

IBM closed at 80.24, and the spec expects to open on about 90,000 shares at 80.50.

Is there any reason why all 6 of these (marketable) orders would not be executed if the stock opens at 80.50? How can there be any precedence when they are all effectively marketable and guaranteed a fill?


Now, Example 2:
6 different orders sent at 09:25 ET:

Sell Short 200 IBM MKT OPG
Sell 200 IBM MKT DAY
Sell 200 IBM LMT 80.00 OPG
Sell Short 200 IBM LMT 80.00 DAY
Sell Short 200 IBM LMT 79.00 OPG
Sell 200 IBM LMT 79.00 DAY

IBM closed at 80.24, and the spec expects to open on about 90,000 shares at 80.50 (an uptick).

Is there any reason why all 6 of these (marketable) orders would not be executed at 80.50 if that is the opening price? How can there be any precedence when they are all effectively marketable, uptick-qualified, and guaranteed a fill?


Examples 3, 4:
Do the same things as 1 and 2 at 15:30 ET, subbing CLO for OPG. Assuming the close is 80.50 and that is a 0-plus tick, is there any way they don't all get filled?

 

[jimrockford]

Alanm,

maybe I don't understand your question, but if I do, then here is what I believe to be an answer.

I believe that precedence can only be an issue for a limit order having a price which matches the opening price or closing price. If your order is tick-qualified; and is a market order or is a limit order priced more aggressively than the opening price (or closing price), then precedence is not an issue and execution is guaranteed. If your order is tick-qualified, but is a limit order with price matching the opening (or closing) print, then you might not get filled, and then precedence matters. Or maybe your question is not as simple as I thought.

 

[alanm]

It goes without saying that a market order will always have price priority over a limit order because it is, by definition, priced superior to it. It doesn't seem that this has anything to do with the issue(s).

It also goes without saying that if your limit order is not marketable at a certain price, you can't get a fill at that price. If you send a Buy LOO 80.00 order and the stock opens at 80.50, of course you don't get filled. We all know that.

Price priority has no effect if the limit order is marketable in whatever scenario is being discussed (e.g. single-price openings and closings). The market or limit order may have priority for a different reason, which is what we're trying to discuss, but can we stipulate that we are talking about marketable limits, and that we of course do not expect fills for limit orders at prices that are not marketable, leaving that out of the equation?

 

[jimrockford]

Quote from alanm:

It goes without saying that a market order will always have price priority over a limit order because it is, by definition, priced superior to it. It doesn't seem that this has anything to do with the issue(s).

It also goes without saying that if your limit order is not marketable at a certain price, you can't get a fill at that price. If you send a Buy LOO 80.00 order and the stock opens at 80.50, of course you don't get filled. We all know that.

Price priority has no effect if the limit order is marketable in whatever scenario is being discussed (e.g. single-price openings and closings). The market or limit order may have priority for a different reason, which is what we're trying to discuss, but can we stipulate that we are talking about marketable limits, and that we of course do not expect fills for limit orders at prices that are not marketable, leaving that out of the equation?

Correct me if I am wrong, Alanm, but you are only discussing single-priced opening and closing prints, correct?

Now, how do you define marketable in such situation? Do you believe that a limit order, with price matching that of the single-priced open or close, is marketable? I doubt whether the concept of marketability applies to a single-priced opening or closing print.

 

[alanm]

Quote from jimrockford:

Alanm,

maybe I don't understand your question, but if I do, then here is what I believe to be an answer.

I believe that precedence can only be an issue for a limit order having a price which matches the opening price or closing price. If your order is tick-qualified; and is a market order or is a limit order priced more aggressively than the opening price (or closing price), then precedence is not an issue and execution is guaranteed. If your order is tick-qualified, but is a limit order with price matching the opening (or closing) print, then you might not get filled, and then precedence matters. Or maybe your question is not as simple as I thought.

I don't understand why matching the opening price is any different than going through it. That is, for a 90K opening at a zero-plus tick of 80.50, are not all 6 of these orders guaranteed a fill?

Buy 200 MKT OPG
Buy 200 LMT 80.50 OPG
Buy 200 LMT 81.00 OPG
Buy 200 MKT DAY
Buy 200 LMT 80.50 DAY
Buy 200 LMT 81.00 DAY

Now, if your puny order causes the spec to push the opening price to 80.51, then it is obvious that your LMT 80.50 orders don't get filled. Other than that, though, if the stock opens at 80.50, how can you not get filled?

 

[alanm]

Quote from jimrockford:
Correct me if I am wrong, Alanm, but you are only discussing single-priced opening and closing prints, correct?

My examples are single-price, since that's the direction we were heading with Don, but what I'm saying should apply to any situation.

Now, how do you define marketable in such situation? Do you believe that a limit order, with price matching that of the single-priced open or close, is marketable? I doubt whether the concept of marketability applies to a single-priced opening or closing print.

I'm going on the assumption that marketable is defined the same way as it always is - "priced at or better" - and that orders that are marketable at the opening/closing price are supposed to be filled (assuming they are not dq'd for time or tick). This may not be true, I guess, but it's been my experience (I "pin it" more often than I should be able to ).