As we have seen Island and Inca have been forced to stop publishing their quotes in the SPY's ,, etc.. I guess they had become too popular and where doing too good a job of providing a open, electronic marketplace. Anyway, most of the volume has gone to ARCA - because they can still publish quotes until they exceed 5% of the volume for 4 of the last 6 months. However, ARCA and the Pacific exchange are partners -- and when you look at a level 2 of the spy's with the regional exchanges - you will notice that ARCA quotes are really the same as the Pacific -- so I think that even when ARCA is forced to stop publishing their quotes -- you will still be able to see where the ARCA market is by looking at the regional Pacific quotes - which will show the best bid and ask -- ??????
My guess is that it is pure coincidence that PSE and ARCA are the same prices because ARCA is an ECN and PSE is traded via a specialist. Nevertheless, we are totally disgusted that ISLD and INCA can no longer be displayed. Talk about a step back into the 1980's. . .and they say it is all to benefit us, the individual investors!
As far as listed trading the PACX and ARCA are the same thing since ARCA merged with the PSE a while ago. The PACX CQS quote represents the inside quotes of the ARCA book. Even if ARCA should surpass 5% of overall volume in an ETF it won't have its quotes shut down as it participates in CQS and ITS. ISLD could have avoided having to stop disseminating quotes on those ETFs if they had agreed to be linked into CQS/ITS (e.g. via Nasdaq Intermarket/CAES). ISLD chose not to take this route as they were unwilling to accept the corresponding restrictions concerning locking and crossing the national market. As for Instinet, I don't know about you, but I'm still seeing their full book in QQQ.
Why would ISLAND make this choice? Specifically, what would they have to do so much differently to avoid crossing of locking the National market? Thanks
In a word, SPEED. You see, if everyone participated and agreed not to cross or lock then the speed of updated quotes is slowed down to the slowest member...in most cases the floor specialist at AMEX. I see this every day. The market makes a move. NQ and ISLD move with the speed of light as traders pull their orders and send new ones. The AMEX QQQ feed noticeably lags, both in prints and quoted bid/ask. So you're in a situation where the REAL market has moved, but the AMEX and member exchanges are still displaying old spreads...not that they will honor them. While the market is running away you would be stuck if you could only play at AMEX speeds. Granted, I'm talking seconds here, but if you're scalping/chipping on day trades or trying to arb pennies from the NQ/QQQ spread, those seconds mean everything. ISLD was the best deal going for a long time because they ensured instant fills on matching orders...REGARDLESS of spread in the "national" market. Sure, you might not get the best price quoted in the marketplace, and on illiquid stocks you might get filled WAY outside the spread. But on very liquid issues, particularly the EFTs, ISLD quotes are almost always more indicative of reality than the lagging prints quoted by AMEX....back when you could see ISLD quotes, that is. I daytrade a lot of QQQ, and for what it's worth, I still find ISLD fills to be better than those on INCA or ARCA...even though I'm routing there half blindly these days, I usually get an improvement. This is not surprising since the last time I checked, ISLD was still doing more QQQ volume (around double) than the next closest ECN (INCA). ARCA is a distant third. --Derek
I'm curious what is happening then, because I see crossed quotes constantly on SPY since ISLAND quotes have ceased being displayed. I would say the quotes are crossed at least 25% of the time. It's very hard to see where the real market is.
There is another rule -- actually an exception to the cross/lock rule -- that says that an exchange may trade through the existing spread by 3 cents. I can only surmise that if I'm buying one of those exchanges at a larger size than the ask at that exchange, the remainder of my order becomes the best bid there, and thus crosses the market. ISLD recognizes that there is a 3 cent exception, but they evidently do not feel that this is good enough. I suppose that they want to be able to fill trades instantly based on their book without asking Rip Van Winkle if it's okay with him to do so. --Derek
Arca is giving me the absolute worst fills I have ever had in my 11 years of trading. I will post a cross-locked bid to sweep the market and I sit there for about 10seconds and I get hit at the highest price as the market drops a few ticks and lower arca offers are clearly available. Does anyone know why this happens? Why am I not getting price improvements? ound |