Shorting Nasdaq stocks
- Thread starter Vinny1
- Start date
Vinny,
In order to get short on a downtick your offer has to reflect the inside quote. Since the inside is quoted in penny spreads your offer must be 1 cent above the bid price on a downtick. This is why most software will default to inside offer when you try to shave inside on a downtick.
Of course if you have a bullet you can offer at any shaved price you want.
In order to get short on a downtick your offer has to reflect the inside quote. Since the inside is quoted in penny spreads your offer must be 1 cent above the bid price on a downtick. This is why most software will default to inside offer when you try to shave inside on a downtick.
Of course if you have a bullet you can offer at any shaved price you want.
I am not sure you meant this how it sounds but this is not necessarily true. I'll use Vinny's other thread on ISLD hidden orders as an example.
Stock is bid at 40.00 and offered at 40.02 and the 40.00 bid is a down bid. If I offer the stock out to short at 40.01 using an ISLD hidden order, the NAZ inside market stays at 40.02. If an ISLD buyer takes the offer, he will get matched to my hidden offer at 40.01 and get price improvement and I will execute a valid short, but my offer never was reflected at the inside market.
Vinny the rule FWIW is simply that if the bid is a down bid, you must sell the stock (short) at at least once cent above the inside (down) bid. BUt also notice that I said "not according to the rules". I know for a fact that many platforms will not police against a shaved offer. EG the stock is 40.00 by 40.01 on a down bid and you offer it out at 40.009 (40.01 minus .001). THis is rounded for display purposes at 40.01 and lumped in with the other shares at the offer and on some platforms will go live as a valid order.
WHen a bidder takes the offer and gets matched with the 40.009, technically it was a short sale at .009 above the bid-just under the one cent minimum required. Nonetheless it works and I have never heard of anyone getting "busted" for it.
On a side note, this applies for sure to "higher priced" stocks but I can tell you that back in fraction days, there was a different rule for lower priced stocks. At that time, if the stock was over $10.00 then it was a 1/16 above the bid for a valid down-bid short, but it was only 1/32 for stocks trading under 10.00. I am not sure if they did something similar when we went to decimals or not.
My apologies I was lazy and didn't spend the time to construct my answer to the shorting question properly. You are right DATT and that is what I meant to say. You just have to offer 1 cent above the bid on a downtick regardless of what the inside quote is.
As for platforms that don't enforce this..... I guess it's great for a while, but even if the software doesn't enforce the rule, the firm where the trader trades is required to. Regardless of wether the software allows it or not it is still technically an illegal short. I'm sure however that it will be a long time before you hear about anyone getting busted for this. I think the SEC has a few other things on their plate these days.
As for platforms that don't enforce this..... I guess it's great for a while, but even if the software doesn't enforce the rule, the firm where the trader trades is required to. Regardless of wether the software allows it or not it is still technically an illegal short. I'm sure however that it will be a long time before you hear about anyone getting busted for this. I think the SEC has a few other things on their plate these days.