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SPY vrs ES (sub penny) Question
- Thread starter MoonlightGraham
- Start date
Quote from abattia:
Chartman,
I'm not saying you are wrong, just that I was unaware of what you are claiming... that larger orders get executed ahead of smaller ones (and I thought I had read up pretty thoroughly on the topic!).
Can you point me to some info on the web from either NYSE (or ARCA), AMEX, or NASDAQ, etc that backs up your claim?
Thanks.
I took the Series 7 course in the mid-70's from the New York Institue of Finance. Their textbook, Work of the Securities Industry, copyrighted in 1973 has information on order queue in Chapter 7, pages 9-12. The P's are: Priority (time), Parity (ability to fulfill), and Precedence (size).
The best method is to test the market yourself. Go to any ECN that quotes low price stocks, preferably below $1.00 in case you get an execution, and find one that has a couple of pennies spread on the bid/ask and some volume. Place an order for 100 shares at one cent better than the best current bid and see what happens. Normally one of two things will happen. The marketmakers will join your bid with larger sizes or they will move the market away from you. If they join your bid, watch the prints and see how long, if ever, it takes for you to get an execution as long as the bid remains steady.
There is a possibility of a contingency order that could give an immediate execution but that would be unlikely on low price securities.
OK, thanks for clarifying!Quote from chartman:
I took the Series 7 course in the mid-70's from the New York Institue of Finance. Their textbook, Work of the Securities Industry, copyrighted in 1973 has information on order queue in Chapter 7, pages 9-12. The P's are: Priority (time), Parity (ability to fulfill), and Precedence (size).
The best method is to test the market yourself. Go to any ECN that quotes low price stocks, preferably below $1.00 in case you get an execution, and find one that has a couple of pennies spread on the bid/ask and some volume. Place an order for 100 shares at one cent better than the best current bid and see what happens. Normally one of two things will happen. The marketmakers will join your bid with larger sizes or they will move the market away from you. If they join your bid, watch the prints and see how long, if ever, it takes for you to get an execution as long as the bid remains steady.
There is a possibility of a contingency order that could give an immediate execution but that would be unlikely on low price securities.
Have also done some more digging for myself in relation to NYSE (and have yet to look at the same for NASDAQ):
"NYSE exchange executions are governed by its rules of parity, priority, and precedence. These rules are rules 72, 104, and 108."
(source http://apps.nyse.com/commdata/pub19...D4F683852574F0004EE1A1/$FILE/NYSE-2008-46.pdf)
Looking at the rules I can now see there will be times when a larger order trumps a smaller one (e.g. round lot can trump odd lot, or an Agency Cross Transaction can get priority), and also other times where an order from a floor broker or designated market maker will get precedence over a public order (which might look like a larger order getting precedence over a smaller one).
Thanks for helping to clarify this for me!
Quote from chartman:
Since you are new to equities trading you probably need to be aware of the three P's of equities trading. A majority of traders who have been trading for years, and most of the retail stockbrokers, do not know of this procedural method of order placement in the queue. The P's are: p=price, p=priority, and p= precedence. Of course price equals the best current price on the bid/offer. Priority equals the time of placement of the order and precedence equals the size, number of shares, of the order. You can be the first as far priority and offering the best price but never get an execution due to precedence if orders being placed later are larger than your size. In other words, if your order is for 100 shares and other orders are for 200 or greater shares, they will get executed ahead of you. The market can move away from you while you are waiting even though you were actually first with the best current price. Since this important tid bit of market trading is not on the Series 7, as I have stated, most retail brokers do not know about it. When customers complains about missing the market, the broker will call the order desk and get the canned reply of 'orders being ahead' of yours. They do not know why and the customer never really knows.
Can anyone else confirm this? Are you saying that if I have a bid at 4:01 for 1000 shares and you have a bid at 4:01 for 100 shares, even though I placed my order after you I will get filled first? I know this happens on some futures exchanges (kinda, its based on equal distribution) but on NYSE? NASDAQ? AMEX? I think you are wrong. There is a Java app on nasdaq website that will show all the nasdaq orders and their point in queue. Anyone else with some info?
Quote from swiftmike99:
Can anyone else confirm this? Are you saying that if I have a bid at 4:01 for 1000 shares and you have a bid at 4:01 for 100 shares, even though I placed my order after you I will get filled first? I know this happens on some futures exchanges (kinda, its based on equal distribution) but on NYSE? NASDAQ? AMEX? I think you are wrong. There is a Java app on nasdaq website that will show all the nasdaq orders and their point in queue. Anyone else with some info?
swiftmike99
I had the same doubts (see my post, 4 before yours, and then Chartmanâs response), but nobody else stepped up to confirm or deny the assertion (so Chartman may well be correct)...
... So I did some research on my own (see my post, 1 before yours).
I was only able to obtain information for NYSE (from the website); NASDAQ customer âserviceâ (âserviceâ ... thatâs a joke!) didn't bother to respond to my inquiry for help or information.
In the case of NYSE, therefore, I learned the following...
⢠An odd lot (less than 100 shares) will always be trumped by a round lot (greater than 100 shares), even if the larger order comes later.
⢠Agency Cross Transactions (25,000 shares or more by an exchange member for the account of somebody who is not an exchange member) are entitled to priority.
As far as I could see, these were the only two ways that a later, larger order could get in front of an earlier, smaller one at the same price under NYSEâs rules. As I wrote above, how NASDAQ works in these situations, I wasnât able to find out ...
So, Iâm certainly not pretending Iâm any expert on this, nor am I asserting that I correctly interpreted what I read; but in the absence of an âexpertâ stepping in to clarify (perhaps Chartmanâs the expert, and all weâre doing is just shooting the messenger!), thatâs all I have to go on for now ...
Quote from abattia:
swiftmike99
I had the same doubts (see my post, 4 before yours, and then Chartman�s response), but nobody else stepped up to confirm or deny the assertion (so Chartman may well be correct)...
... So I did some research on my own (see my post, 1 before yours).
I was only able to obtain information for NYSE (from the website); NASDAQ customer �service� (�service� ... that�s a joke!) didn't bother to respond to my inquiry for help or information.
In the case of NYSE, therefore, I learned the following...
� An odd lot (less than 100 shares) will always be trumped by a round lot (greater than 100 shares), even if the larger order comes later.
� Agency Cross Transactions (25,000 shares or more by an exchange member for the account of somebody who is not an exchange member) are entitled to priority.
As far as I could see, these were the only two ways that a later, larger order could get in front of an earlier, smaller one at the same price under NYSE�s rules. As I wrote above, how NASDAQ works in these situations, I wasn�t able to find out ...
So, I�m certainly not pretending I�m any expert on this, nor am I asserting that I correctly interpreted what I read; but in the absence of an �expert� stepping in to clarify (perhaps Chartman�s the expert, and all we�re doing is just shooting the messenger!), that�s all I have to go on for now ...
Adding to cases. A visible 1000 shares will get filled before 100 hidden shares even if 100 posted earlier.
From Rule 72 ...Quote from pookie:
Visible? Hidden? Could you please explain?
The term "displayed interest" includes that part of an order that is published as, or as part of, the Exchange BBO.
and
Only the portion of setting interest that is or has been published in the Exchange BBO shall be entitled to priority allocation of an execution. That portion of setting interest that is designated as reserve interest and therefore not displayed at the Exchange BBO (or not displayable if it becomes the Exchange BBO) is not eligible for priority allocation of an execution irrespective of the price of such reserve interest or the time it is accepted into Exchange systems.
http://www.nyse.com/Frameset.html?displayPage=http://rules.nyse.com/NYSE/Help/Map/rules-sys77.html
[makes good bedtime reading]