Opening auctions

Humble Investor · Jun 7, 2019

Hi,

I use opening auctions a lot but have always been afraid of moving the opening price too much, hence I have always submitted very small orders. Is an order for 10k shares of a $7 stock with 1000 shares average opening auction volume and 100k AVD a lot? How much of a move can I expect? Thanks a lot

tommcginnis · Jun 7, 2019

42.
42 and 3.141598 and 1.96.

(On weekends, 2.7182, roughly.)

d08 · Jun 7, 2019

So you're asking if doing 1000% of the average auction volume too much? Yes, it is.

Humble Investor · Jun 7, 2019

d08 said:
So you're asking if doing 1000% of the average auction volume too much? Yes, it is.

I'm asking by how much can the stock move? 0.50%, 1%, 2%? Is there any rule that DMMs must follow so they can't screw people? In a fast moving market I rather pay 1% extra and get the fill but I'm not willing to pay 5%. I periodically see very large opening volume in illiquid stocks with little price change but not sure how to estimate the change when I want to auction a big block myself. Is there anyway to estimate that? Thanks

trend2009 · Jun 7, 2019

it depends if you use market or limit order on open crossing.

d08 · Jun 8, 2019

Humble Investor said:
I'm asking by how much can the stock move? 0.50%, 1%, 2%? Is there any rule that DMMs must follow so they can't screw people? In a fast moving market I rather pay 1% extra and get the fill but I'm not willing to pay 5%. I periodically see very large opening volume in illiquid stocks with little price change but not sure how to estimate the change when I want to auction a big block myself. Is there anyway to estimate that? Thanks

Difficult to precisely estimate but it does seem anything over 10% is moving the price. 1% leeway is a lot though, you can probably do 50% of the auction within that as the other side will arb your order. I doubt you can get a hard estimate though.

trend2009 said:
it depends if you use market or limit order on open crossing.

Why would this matter? If both are fully executed then the effect is the same.

Humble Investor · Jun 8, 2019

d08 said:
Difficult to precisely estimate but it does seem anything over 10% is moving the price. 1% leeway is a lot though, you can probably do 50% of the auction within that as the other side will arb your order. I doubt you can get a hard estimate though.

Thanks. I've already been 50% to 75% of several auctions and I really liked quality of those fills. I guess there is no other way other than experimenting and I should just gradually increase my order size over time. Thanks again!

Humble Investor · Jun 8, 2019

trend2009 said:
it depends if you use market or limit order on open crossing.

Maybe it's only me but my experience with LOO/LOC orders has not been good.

qlai · Jun 8, 2019

Humble Investor said:
Maybe it's only me but my experience with LOO/LOC orders has not been good.

Probably depends on which side of the imbalance you are on? If you ARE the imbalance, you are always on the wrong side, right?

Humble Investor · Jun 8, 2019

qlai said:
Probably depends on which side of the imbalance you are on? If you ARE the imbalance, you are always on the wrong side, right?

Yeah, probably. I've just had too many unfilled orders using LOO. I prefer MOO because it guarantees a fill.