Difficulty to be the best bid or best offer

Discussion in 'Trading' started by Option Trader, Feb 19, 2008.

  1. Thanks.

    Is it correct that a particular player with such a program (specialist? MM?) is often listed on several exchanges at the same time?
    I get this impression because of the situations where the bid gets lifted, as it seems the bids & offers on all the exchanges suddenly turn "red" in synch with one another?
     
    #11     Feb 20, 2008
  2. trom

    trom

    If you're talking about stocks, this is not correct.

    If you have a bid for 1000 shares on ARCA, for example, at 100.00 and a 10,000 order joins you, you will get filled for your 1000 before the other guy gets anything. If he joins the bid on a different ECN or on his MMID, then it depends on how the contra party (seller) prefers to route his order.
     
    #12     Feb 20, 2008
  3. Yesterday, someone who had a bid at $19.10 on ARCA for 100 shares to buy (actually a hidden order for much more as well), I matched him with 1,000, and got an instant fill, and I believe he got nothing. This was with IB on ARCA.
     
    #13     Feb 20, 2008
  4. trom

    trom

    If he had 100 showing on ARCA and more reserve size, and you come in with 1000 showing, it works like this:

    His 100 showing will get priority over your 1000, however, after getting filled for his showing 100, his reserve is automatically at the back of the line. The next 1000 shares will be yours. After your fill, his reserve will be hit.

    Visible liquidity always gets priority over hidden, even if the hidden was submitted earlier.
     
    #14     Feb 20, 2008
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    #15     Feb 20, 2008
  6. As soon as a bid or offer changes on a certain series of options, the bid/ask prices will change based on many algo's. As soon as an offestting paired stock changes price, a bid or offer will change based on that algo. Same with the cancellations on bid or at offer.

    No magic, just the way it is. Learn to use this information to your advantage by outside enveloping versus matching NBBO. (Just a suggestion, trying to help).

    Don
     
    #16     Feb 20, 2008
  7. Actually there are parity and priority rules on all the options exchanges. No one, whether it’s a market maker or a firm or a big customer can get in the que ahead of you at your price if you were there first. They can however bid the same on another exchange and then it would depend on where the sell order got sent to. IB can not and does not hide orders and not show them to the market place. It would be so easy to expose that. They do however have to give you the NBBO and they might send it to an exchange where they’re the NBBO on the other side of the order.

    None of the market making or specialist firms segregates by brokerage house. As the electronic orders come in they get posted automatically and the systems know which orders re tagged customer or firm. The systems also keep the que for remote market makers. Each market maker, specialist and remote market maker sets their pricing parameters and then lets their systems stream in their bids and offers, the system also adjusts them based on those variables (time, IV, price of the underlying, and even the IV of other stocks in the sector).
     
    #17     Feb 20, 2008
  8. Thank you. Can you explain what you mean by "outside enveloping"? Sorry I didn't understand your jargon.
     
    #18     Feb 20, 2008
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    #19     Feb 20, 2008
  10. Thank you.
     
    #20     Feb 20, 2008