Priority of Market Orders Relative to Limit Orders

C

cwb1014

I'm under the impression that market orders always have priority over limit orders, but am not sure this is correct. Does anyone know the actual rules that govern the priority of orders? If so, I'd really appreciate your letting us know what those rules are.

Many thanks in advance for any help that anyone can offer here.

cwb1014

:cool:
 
Quote from cwb1014:

I'm under the impression that market orders always have priority over limit orders, but am not sure this is correct. Does anyone know the actual rules that govern the priority of orders? If so, I'd really appreciate your letting us know what those rules are.

Many thanks in advance for any help that anyone can offer here.

cwb1014

:cool:
More...

We teach our people to use limit orders, at (for sells) a price lower than the bid, thus the Specialist clerk/auto program can fill the order based on the NBBO price. If there is a 27.45 bid, send order to sell at 27.40, likely filled at 27.45 immediately.

Market orders have to be matched or batched by the Specialist, which can take additional time to determine what the "market" really is.

Based on time priority.

Don
 
Quote from Don Bright:

We teach our people to use limit orders, at (for sells) a price lower than the bid, thus the Specialist clerk/auto program can fill the order based on the NBBO price. If there is a 27.45 bid, send order to sell at 27.40, likely filled at 27.45 immediately.

Market orders have to be matched or batched by the Specialist, which can take additional time to determine what the "market" really is.

Based on time priority.

Don
More...

This all in theory...
Assuming that you are Bright Trading...
And you are dealing with an honest Clearing Firm...
And have real clout.

I've made 500,000 trades over 15 years...
And probably placed 2,000,000 Limit Orders.

I would never, ever follow your advice...
To send Limit Sell Orders BELOW the NBBO.

It would be suicidal...
I would be gamed all along the food chain...
And I would have no recourse whatsoever.

Mr. Bright...
Please tell me that nice bedtime story about the Tooth Fairy again.
 
NYSE Hybrid changed it all...

Market orders and marketable limit orders get filled automatically by the matching system based on the time priority at the protected quotes unless the market is slow and the specialist can manually tweak the quotes.
 
Quote from QuantPlus:

This all in theory...
Assuming that you are Bright Trading...
And you are dealing with an honest Clearing Firm...
And have real clout.

I've made 500,000 trades over 15 years...
And probably placed 2,000,000 Limit Orders.

I would never, ever follow your advice...
To send Limit Sell Orders BELOW the NBBO.

It would be suicidal...
I would be gamed all along the food chain...
And I would have no recourse whatsoever.

Mr. Bright...
Please tell me that nice bedtime story about the Tooth Fairy again.
More...

If you're trading retail, I agree with you since all your orders have to be routed via your brokerage firm. Not to sound pissy, but we probably send 500,000 orders each day, and I stand behind my methodology, as do all my traders.

I just go by what the NYSE specialists have shown me, Goldman (RediPlus) etc.

No "tooth fairy" here, we live in the real world, and yes, it's always nice to have the clout of Goldman in support if and when we need them.

Feel free to call me to discuss the details of my statements, I'm always happy to chat. 702.739.1393.

Don
 
Quote from speculatus:

NYSE Hybrid changed it all...

Market orders and marketable limit orders get filled automatically by the matching system based on the time priority at the protected quotes unless the market is slow and the specialist can manually tweak the quotes.
More...

You might be interested in the "exceptions" and "exemptions" from the hybrid system...pretty much back to where we were before hybrid and NMS in many regards.

http://tradersmagazine.com/magazine.cfm?id=2871

I see a heck of a lot of Specialist over-rides every day.

Don
 
Quote from Don Bright:

You might be interested in the "exceptions" and "exemptions" from the hybrid system...pretty much back to where we were before hybrid and NMS in many regards.

http://tradersmagazine.com/magazine.cfm?id=2871

I see a heck of a lot of Specialist over-rides every day.

Don
More...

I watch several NYSE stocks every day quote-by-quote and trade-by-trade (yes, I literally see every quote and print). When the market is fast, it's very orderly and precise, all prints go exactly at the bid or at the offer, sometimes you see price improvements or prints more than size on the side (the specialist supplements the size). When the market is slow (because of LRP), you can see all kind of weirdness starting from printed blocks inside of the spread, and ending with prints out of the current quotation (trade-through). That's what I care about - where a trade was printed (which side) and what was the size. Sweeps also can give you a clue which side is more aggressive.
 
Our Redi platform shows each trade and size as well, and we see multiple prints daily away from the NBBO, whenever we have this sweep action, our quote lines change color to signify these events. We can set our computers to show consolidated quotes and the NYSE only, I prefer NYSE only, keeps the "noise" away, and appears more orderly. Different services show slightly different action we've noticed.

We keep TrackData, eSignal, and First Alert for back up, and each shows things slightly different...not big deal overall, as long as we see good price/volume actions.

Don
 
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