Guys you are giving out false information. A market order on the NYSE CANNOT be front run, it wil automatically sweep the book instantaneously... the specialist does not match orders except for when the price moves a large amount in a short period of time and then the book gets locked.
I'm not saying if they can step in front of you. What I'm saying is you have a bid, there is a sell market order, then BEFORE the market order hits my bid the specialist sees the mkt order and steps in and pennies me.
Where is the false information? The specialist still has ways to participate in the fast market (in a limited way though). Please explain where we are wrong here.
If the specialist participates in a fast market, he is behaving as a day-trader. When a market order comes in and the market is in fast mode (which is 99.9% of the time), it automatically executes against the NBBO, and then sweeps the New York book (NYOB+Floor broker reserve liquidity); however, that sweep is instantaneous. Whatever's there when you press the button, you get, the only lag comes from the time it takes the data to reach the exchange from your computer. Consequentially, the specialist cannot front run your market order since it executes instantaneosly. I'm an NYOB Scalper, I have to know this.
He doesn't see the market order as it gets executed instantaneously, taking the NBBO and then sweeping the book.
The specialist can provide single-price executions, thus avoiding sweeps. It's in NYSE rules and I see it multiple times per day. BTW, reserve liquidity not in Open Book, it's in Display Book...
Yeah, I know. But he only provides single price executions during an LRP, which is a special trading condition. He can only "front run" your market order if you send in 50k shares (it can be fewer) to sell and it knocks a stock down by 50 cents... or if it knocks a $100 stock down a point. It has to be a huge institutional panic order.
Not necessary. The specialist sees all the flow, but he cannot front run any market orders. The scenario you described will trigger LPR, and then specialist has to step in and provide liquidity.