ARCA listed after-hours

Discussion in 'Order Execution' started by alanm, Jul 31, 2002.

  1. alanm


    For the last 4+ weeks, I've had difficulty executing against ARCA in listed stocks after-hours.

    Using IB, I send the order to lift an ARCA offer or hit an ARCA bid, either direct to ARCA or via SMART routing. In both cases, ARCA rejects the order. If sent via SMART, it then posts somewhere else. This is happening when ARCA is alone at the inside (or I would gladly send the order elsewhere).

    IB and I have spent a ridiculous amount of time trying to trace these problems for the last couple weeks. ARCA gives various excuses, none of which really make much sense. The problem may have started exactly on July 1st, and may be related to changes at ARCA on that date, but they don't seem to be able to explain what those changes were, exactly.

    - "The order I am trying to hit is actually on another ECN and being displayed by ARCA. Because IB orders are coded not to route outside of ARCA, the order is rejected, since they will not post a locking bid/offer." AFAIK, this is ridiculous. I've never seen ARCA display another ECN's order in a listed stock after-hours. What would be the point? How would they decide which order to show and which not to show? Why would they want to mislead people into thinking there is twice as much size at a given price than there actually is? We can all see the ARCA bookviewer, showing the orders on the other ECNs, and I've never seen ARCA "repeat" another ECN. Is there any truth to this?

    - "It's a stale bid/offer" Looking at the times and watching the activity (easy to do in the slow after-hours), this doesn't seem to be the case. I watch other people execute against those orders and reduce the size of them. Sometimes, if I really want out, I'll cross the ARCA bid/offer on Island by 0.03-0.05 and someone else, who seems to be able to execute against the ARCA order, will take me out.

    - "The reject message is 'locked market'. ARCA won't execute in a locked market." This doesn't make sense either. If RDBK is posting a bid that locks against an ARCA offer, why wouldn't they allow you to execute against ARCA to break the lock? You'd think that's exactly when they _should_ want you to hit them.

    - "There is a superior bid/offer, and because the order is coded to not go 'pro-active' (or whatever the ARCA equivalent is), it gets rejected. Besides, ARCA can't go 'pro-active' in listed stocks yet." This may be the true problem, though I think it's because ARCA is getting stale quotes from the other ECNs that is leading it to think that. A couple days ago, I was trying to take an offer on ARCA and they claimed there was a better offer on RDBK, which there wasn't. I've also heard them say it's coming from BRUT, which is pretty surprising. AFAIK, BRUT orders for listed stocks show up in the listed stock ITS display as coming from "NASD" (the NASDAQ intermarket participant in ITS). Whenever I've looked, this quote is way outside the market.

    This used to happen alot on ARCA many months ago, but until this month, it seems to have been working pretty well. Now, for the last 4+ weeks, there are constant problems in many different stocks.

    Is anyone else (at a broker other than IB) having this problem? Any idea what's causing it?

    Emails welcome.
  2. I have run several cases through IB of this ARCA problem happening. It appears that ARCA is trying to match "ghost quotes" (quotes that don't exist) on a different exchange by rerouting the order from ARCA. Since IB sends "passive" orders into ARCA (these orders cannot be rerouted), the order is rejected. This problem is on ARCA's end. However, most brokerages do not send in "passive" orders (they send "proactive" orders that allow rerouting). My feeling is that other brokerages might not have this problem. IB changed to "passive" orders awhile ago in order to cut down on costs (a rerouted order gets charged 2 ECN fees). But anyway, something appears to be screwed up at ARCA.

  3. I had the same problem. Without going into all the esoterica, if ARCA is posting an offer of 10.50, and I send an order to buy directly to ARCA for 10.50, what cocamammie programming prevents this from matching?

    It's possible that ARCA is seeing old quotes from regular hours, and thinks the 'bid' is crossing the primary market, kicking the order back even before trying to match it.