Not only will specialists or DPM"s complain but I can tell you that IB has internal monitoring programs that will detect small lot baiting and terminate accounts. The exchanges won't tolerate a broker that allows it. As for your immediate execution, I bet the fill was on ISE. It is an electronic exchange. Anyone with a computer algorithm can easily see your order splitting the market and hit you before you blink should they desire.
So if I understand this correctly, this is illegal? It is illegal to put a bid or ask in just to get a better fill by pulling your bid ask and immediately hitting one of those other contracts? I'm not trying to get in trouble here -- but I thought it was a free market. I thought these were the kind of games people need to play to get an edge.
Let me just clarify this so I know. There is an option with a spread of 3.60x3.80. I want to buy 5 of them at 3.70. So, I put up one contract for sale at a new ask at $3.70. I then immediately see 10 contracts available, and buy 5 of them. Is this illegal?
If you're using IB, I think you won't even be able to transmit the buy in TWS until *your* sell has cancelled. See above, "immediately placing the closing order, GTC, as soon as the opening order is filled": One day I was waiting for a buy partial fill to complete, and tried to get a head start on transmitting the exit. No dice. BTW, I don't think anyone has expresed an opinion on the original question . . . Are options FIFO? (especially for limit orders)
Ok, what about this. I use my IB account to put an order in to lower the ask or raise the bid. I then use a totally seperate account (let's say my neighbors) to hit that new ask or bid. a) Is that illegal b) How would they know (investigation?) c) Don't people do this sort of thing with stocks all the time? d) If the two accounts are different, how would either of the firms internal systems detect anything amiss? As far as IB is concerned I'm just trying to buy an option at 3.70 instead of 3.80 and as far as the other firm is concerned, someone else just sold 10 contracts at 3.70 because there was suddenly an offer to buy at 3.70
I've done a search on Google and nothing came up for "small lot baiting." Where can I get more information about this? How am I supposed to know this is illegal to do? Where can I find a list of things that are acceptable to do in trading and those that will get you in deep shit?
See the REDI page: a) Maybe, if the SEC considers it to be "manipulation". Definitely forbidden on REDI page, which says "or any other account where the trader has a beneficial interest". c) I'm shocked, SHOCKED! In general . . . High-volume traders risk being caught by pattern-matching software which scans T&S. For little fish . . . If they're just accounts in the same name (SSN) at different brokers, I think it might be caught by the *clearing* firms, which could correlate all accounts for the same owner. Might be a different answer if the accounts are at two different brokers which use two different clearing firms. For accounts in two different names and SSNs, probably would never get noticed if you're small. But you still have a 0.00001% chance of having a REALLY bad day -- the kind of situation where "they" are actually after you for a completely different reason (like an IRS audit), but once you attract their attention, they take apart your life piece-by-piece as a way of getting more leverage on you.
There has still not been an answer to the original FIFO question. I would guess that the answer would have to be yes.. but stranger things have turned up. Thanks in advance for an answer.