20.25 * 20.30 you place a buy limit order @ 20.25 Then a sell market order comes in. Someone "inside" sees this sell market order and before it hits my bid he then places a bid @ 20.26 Could this ever happen at any exchange? NYSE, NASDAQ, GLOBEX, CBOE???
It happens all the time. http://www.google.com/search?hl=en&q="market+maker"++criminal+nasd&btnG=Search Your trading strategy has to be robust enough... With wide enough profits margins... That you can easily ABSORB the "slippage" of people playing games with your orders.
Well in this case not liquid at all... So you're telling me... This is is 100% okay in this scenario 20.20 * 20.25 Insider Joe. Wants to sell his long position and be the first to receive any buy market order. Normally he would offer 20.24, but he fears that if he does the person offering 20.25 will offer 20.23. So instead he waits until he sees a buy market order in the system, then before the market order hits the 20.25 offer, he offers 20.24 and makes the sale. ~ that seriously happens?
I just called the CME 312 930 1000 and they said it is impossible for someone to see a market order, and then BID/OFFER 1 tick in front. So in the above case this guy said it's impossible i called ARCA they said that this was impossible too I called NYSE and they said that this was possible because the specialist has to match the market orders, so he would be able to be the JOE in this case and fill himself... last time I route to NYSE
1. NYSE HYBRID does match almost all orders these days (when market is fast). 2. During slow markets the specialist cannot go long on up-ticks and and sell on down-ticks. He can give you price improvement though, or give you single-price execution if your order size is greater than the quoted size - it's actually good for you since you won't sweep the book.
but spec... could Insider Joe do that... which is 1) see a market order that was sent and THEN place a bid / ask to take that market order... or once the market order is sent there is NO way for anyone to see it and they can't slip a bid / ask in. Is it right to assume that @ the NYSE this can happen, and @ the electronic exchanges it CANNOT?
Theoretically, any broker can front-run your market orders since he sees all your flow. And I'm pretty sure every big house does that at some extent. That includes the specialists, but they do it very seldom since they got audited, and fines are pretty big. With HYBRID the specialist cannot benefit from what he sees every quote and trade in the system - all the specialist orders are delayed and every trade is logged.
Spec, 1. Thanks 2. Wow you know A LOT about orders / the system / rules and regs. Every single question I ask, it seems like you are able to answer...unbelievable
In general, the mkt mkr/specialist can step in front of the best bid or offer as long as they are improving by a penny or more in the equity and option mkts. Its called price improvement and it is completely legal. It is more noticeable in the options markets since up until recently everything was at least a nickel spread. Only if they execute for their own acct at your price or worse, are they required to execute your order. Its covered by updates in the Manning Rule from a couple years ago.