You have to learn how to use NX orders, market orders and ECN orders effectively, especially in faster moving stocks. The Specialist's Open Book is very dynamic because of orders constantly being entered and cancelled. You can't expect to get a decent fill by relying on NYSE limit orders. Obviously, the traders who go market will have priority over you. That's the way the game works. Learn to adjust and quit your griping.
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Price Improvement on NYSE must GO !
- Thread starter hayman
- Start date
You have to learn how to use NX orders, market orders and ECN orders effectively, especially in faster moving stocks. The Specialist's Open Book is very dynamic because of orders constantly being entered and cancelled. You can't expect to get a decent fill by relying on NYSE limit orders. Obviously, the traders who go market will have priority over you. That's the way the game works. Learn to adjust and quit your griping.
Could somebody who actually KNOWS define price improvement for us. In particular, there are two idiosyncrasies at the NYSE, and I would like to know which one(s) of these is/are referred to as price improvement:
1. When the quote is 50.20 x 50.25 and you submit a marketable buy order you get a fill at 50.24
2. When the quote is 50.20 x 50.25 and you have a working limit order to sell at 50.29, someone submits a huge buy order, and as a consequence your order is filled as part of a lage block at 50.40
The consensus on here seems to be that only 1. is called "price improvement". If that is so, then what is the name for 2., which is basically "We cheat the other guy and pass the savings on to you" ?
1. When the quote is 50.20 x 50.25 and you submit a marketable buy order you get a fill at 50.24
2. When the quote is 50.20 x 50.25 and you have a working limit order to sell at 50.29, someone submits a huge buy order, and as a consequence your order is filled as part of a lage block at 50.40
The consensus on here seems to be that only 1. is called "price improvement". If that is so, then what is the name for 2., which is basically "We cheat the other guy and pass the savings on to you" ?
Haymen how could you know what orders are where? How can you know what orders are coming in? Market orders are never shown and limit orders that reach at the exact right time never get shown either. You think you are entitled to execution just because you have a limit on the book..nope..price takes precedence and you or I, or for that matter anyone but the specialist knows when the market orders arrive or where any of the stop orders are...remember stop orders could be there for months but you will never see them..so what you assume is a market order coming in could have been a stop order being executed. You and I can only assume what took place. So quit focusing on the times you think you were screwed and focus on many times you get a better fill..you'll feel better.
BTW, I trade very thin-liquidity listed stocks. And I would say on average, when I have a limit sell order, that at least 5 "price improvements" occur on me before I am filled, OR the market moves against me. I find it doubtful that there are market sell orders stepping in front of me, in concert with the market buy orders that are getting price improved, just as the market buy orders are entered. These are stocks that trade 100K-200K shares today, and are not high activity stocks. The odds of this repetitively happening are very great indeed.
My contention, in this scenario, is that the Specialist is the one exercising the "price improvement", and he is doing it as a way to unload his stash, or more realistically, in an attempt to drive down the price, and get weak hands (those with selling limit orders) to cash in. This is just a sell scenario, and the same principle applies on the alternate side of the book.
Another contention is that these are floor orders that are given "market priority". That is, when a market buy order is coming in, these floor orders are given "market sell" priority in front of limit orders, so that they get a good price - typically a penny below best ASK.
Does anyone agree or disagree with me ?
My contention, in this scenario, is that the Specialist is the one exercising the "price improvement", and he is doing it as a way to unload his stash, or more realistically, in an attempt to drive down the price, and get weak hands (those with selling limit orders) to cash in. This is just a sell scenario, and the same principle applies on the alternate side of the book.
Another contention is that these are floor orders that are given "market priority". That is, when a market buy order is coming in, these floor orders are given "market sell" priority in front of limit orders, so that they get a good price - typically a penny below best ASK.
Does anyone agree or disagree with me ?
Like I said, there is no way to know for sure what orders are what. But I can tell you from riding the train everyday for with specialist clerks that whenever I was shown the p/l for the day from the post..the thin stocks that they handled ALWAYS showed a profit. This would make me want to look for a different pond to swim in ..because the big fish has no predators in that pond. Look for a pond where bigger fish show up to keep the bully fish honest or learn to live with the bully fish. Your choice.
Quote from hayman:
BTW, I trade very thin-liquidity listed stocks. And I would say on average, when I have a limit sell order, that at least 5 "price improvements" occur on me before I am filled, OR the market moves against me. I find it doubtful that there are market sell orders stepping in front of me, in concert with the market buy orders that are getting price improved, just as the market buy orders are entered.
Does anyone agree or disagree with me ?
Buy Stop and Sell Stop orders will take precedence over your static limit orders. These also take precedence over traders who go market at the same time as the stops are hit. I'm not sure why this happens but you have to be aware of it.
I agree with your contentions, but the fact that I trade very thin liquidity stocks, and am always entering limit order below market, and there has been no "front-running" activity of that nature prior to me entering that limit order (in last 10 mins or so), lead me to believe that my contentions are correct. Thanks for your feedback.
Haymen,
I'm in no way understating the fact that they always made $$ in the thin stocks. Most of the time each post handled 4-5 stocks and the thin ones always showed a profit. Not huge sums mind you but as the month went on they added up. Just made me think about the stocks to trade when the guy I would be trading against had superior info and made money in certain stocks everyday. And you are right they would tell me hoe they would wait for a market to come in then use it to their advantage to run stops and move the market around. The only time they didn't have a huge advantage was when the floor brokers show up. Personally I try to trade stocks that have a decent amount institutional action in them. This way if I can see a floor broker at work I have an edge.
I'm in no way understating the fact that they always made $$ in the thin stocks. Most of the time each post handled 4-5 stocks and the thin ones always showed a profit. Not huge sums mind you but as the month went on they added up. Just made me think about the stocks to trade when the guy I would be trading against had superior info and made money in certain stocks everyday. And you are right they would tell me hoe they would wait for a market to come in then use it to their advantage to run stops and move the market around. The only time they didn't have a huge advantage was when the floor brokers show up. Personally I try to trade stocks that have a decent amount institutional action in them. This way if I can see a floor broker at work I have an edge.
ITS Exception
There is talk that the SEC is considering a 2-3 cent âde minimusâ exemption to the ITS trade-through rule for listed stocks. The trade-through rule currently requires trades to be routed to the market with the best price. Such a move could give ECNs an important new foothold in building NYSE market share because it would make it easier for traders to interact with ECN prices that are just beyond the best NYSE bid or offer. A pilot three-cent trade-through exemption presently applies to exchange traded funds, and traders have found it extraordinarily helpful. In fact, most traders seem to want the exemption increased to five or ten cents. In ETF trading, slow moving ITS participants, such as the AMEX and NYSE, are still severely impairing traders in fast markets by using ITS rules to âblockâ access to ECNs quotes that are more then three cents above or below the best bid or offer.
Bsulli
There is talk that the SEC is considering a 2-3 cent âde minimusâ exemption to the ITS trade-through rule for listed stocks. The trade-through rule currently requires trades to be routed to the market with the best price. Such a move could give ECNs an important new foothold in building NYSE market share because it would make it easier for traders to interact with ECN prices that are just beyond the best NYSE bid or offer. A pilot three-cent trade-through exemption presently applies to exchange traded funds, and traders have found it extraordinarily helpful. In fact, most traders seem to want the exemption increased to five or ten cents. In ETF trading, slow moving ITS participants, such as the AMEX and NYSE, are still severely impairing traders in fast markets by using ITS rules to âblockâ access to ECNs quotes that are more then three cents above or below the best bid or offer.
Bsulli