JB,
Direct from NASD, here's the answers to your questions; (NASD answers in caps):
Example market scenario #1:
Stock XXXX offers to sell are as follows at 10:00 AM ET:
GSCO 17.76 100
MSCO 17.76 200
PRUS 17.77 700
ISLD 17.77 500
REDI 17.77 1000
ARCA 17.80 400
NITE 17.80 1000
1. Will a SuperSOES buy limit order for 17.80 x 500s execute 300s @ 17.76 (with price improvement), and then having taken out GSCO and MSCO execute the remaining 200s against PRUS (now at the NBO) at my limit? YES
1A. Is it correct that a market order operates the same as a limit order in this situation? YES
2. If the above #1 order is entered behind someone else's order in queue for 17.77 @ 800, and the senior order fills first (taking out GSCO and MSCO, and leaving PRUS with 200), will the junior order hit PRUS for the remaining 200 and stay live for up to 90 seconds, waiting for a market maker to appear at the NBO within limit price, or will the limit order cancel immediately after taking out PRUS, with no market maker left at NBO? THE LIMIT ORDER WILL HIT PRUS AND THEN REMAIN LIVE FOR 90 SECONDS.
2B. How does a market order operate in this situation compared to a limit order? THE MARKET ORDER WILL ALSO BE HELD FOR 90 SECONDS OR UNTIL A MARKET MAKER EITHER JOINS THE ECN OR THE ECNS MOVE AWAY FROM THE INSIDE. OBVIUSLY, IF AN ECN MOVES AWAY AND 17.80 BECOMES THE NEW INSIDE, THE MARKET ORDER WILL BE ELIGIBLE FOR EXECUTION.
3. Will a SuperSOES buy limit order for 17.80 x 1,500s execute (with price improvement) 300s @ 17.76 (GSCO/MSCO), 700s @ 17.77 (PRUS), and then finding no market maker at the NBO, stay live for up to 90 seconds until ECNs clear (ISLD/REDI) ahead of NITE and NITE @ 17.80 becomes the NBO, then execute the remaining 500s against NITE at my limit? YES
3A. Or, will the above #3 limit order with 500s unfilled immediately cancel when there are only ECNs at the NBO, even though there is a MM within the limit price? IT WILL NOT IMMEDIATELY CANCEL.
3B. How does the behavior of a market order differ from a limit order in this situation? THE MARKET ORDER IS ELIGIBLE FOR EXECUTION IF A NEW INSIDE IS CREATED.
4. If the #3 above 1,500s limit order is entered at 17.77 instead of 17.80, and GSCO/MSCO/PRUS fills 1,000 leaving only ECNs at the NBO, 500s unfilled, and no MMs within limit price, will the limit order stay live for up to 90 seconds waiting for a market maker to appear at the NBO within the limit price? YES
5. Do SuperSOES buy limit orders have to be entered at the fast-changing NBO, or can buy limit orders be entered higher than the NBO without canceling (crossing the market), thereby relieving the trader from having to match price exactly with the NBO at any given instant? BUY LIMIT ORDERS CAN BE ENTERED AT PRICES HIGHER THAN THE OFFER.
5A. If they can be entered higher than the NBO without canceling, is there a percentage or price increment limiting how much higher? ORDERS CAN NOT BE MORE THAN 25% AWAY FROM THE INSIDE (20% FOR STOCKS TRADING AT LESS THAN $5)
6. Can SuperSOES limit orders lock the market without canceling? YES
7. How are limit orders handled in these different situations:
A) No market maker is at the NBO when the buy limit order is entered at a price several tiers above the NBO. THE ORDER IS HELD FOR 90 SECONDS OR UNTIL AN ECN MOVES AWAY FROM THE INSIDE, OR A MARKET MAKER JOINS.
B) A market maker is at the NBO when the buy limit order is entered at a price several tiers above the NBO, but other SuperSOES orders fill ahead, leaving only ECNs at the NBO. THE ORDER IS HELD FOR 90 SECONDS OR UNTIL AN ECN MOVES AWAY FROM THE INSIDE, OR A MARKET MAKER JOINS.
C) Only ECNs are at the NBO when the buy limit order is entered at the NBO. HELD FOR 90 SECONDS.
D) A market maker is at the NBO when the buy limit order is entered at the NBO, but other SuperSOES orders fill ahead, leaving only ECNs at the NBO. HELD FOR 90 SECONDS.
8. In the above situations 7A - 7D, how would handling change if the order was a market buy order instead of a limit buy order?
A- HELD FOR 90 SECONDS OR UNTIL A MM JOINS OR A NEW INSIDE IS CREATED.
B- HELD FOR 90 SECONDS OR UNTIL A MM JOINS OR A NEW INSIDE IS CREATED.
C- HELD FOR 90 SECONDS OR UNTIL A MM JOINS OR A NEW INSIDE IS CREATED.
D- HELD FOR 90 SECONDS OR UNTIL A MM JOINS OR A NEW INSIDE IS CREATED.
9. Is it only market orders that have a 90 second queue order life (waiting for ECNs to clear, or waiting for a market maker to join the ECNs at the inside), or do limit orders have the same order life in queue?
BOTH HAVE THE 90 SECOND LIFE. NOTE - FROM 9:30 TO 9:33 - THE 90 SECOND RULE IS EXTENDED TO 180 SECONDS.
Example market scenario #2:
Stock XXXX bids are as follows at 10:00 AM ET:
GSCO 17.75 100
MSCO 17.75 200
PRUS 17.74 700
ISLD 17.74 500
REDI 17.74 1000
ARCA 17.70 400
NITE 17.70 1000
10. Using the buy limit order questions in market scenario #1 above applied to a sell limit order (covering a long position) in market scenario #2, do order handling and fill procedures change? NO
10A. Any changes regarding market sell orders? NO
11. Using the buy limit order questions in market scenario #1 above applied to a sell limit order (selling short) in market scenario #2, how do order handling and fill procedures change?
A. If the NBB is on an uptick? NO CHANGE
B. If the NBB is on a downtick? REJECT SHORT SALES ON ANY DOWNTICK
12. Using the buy market order questions in market scenario #1 above applied to a sell market order (selling short) in market scenario #2, how do order handling and fill procedures change?
A. If the NBB is on an uptick? NO CHANGE
B. If the NBB is on a downtick? REJECT SHORT SALES ON ANY DOWNTICK
I think this covers everything. If there was anything else, let me know.
