does the specialist / market marker know this...

Discussion in 'Order Execution' started by ProgrammerGuy, May 22, 2008.

  1. if the spread is 50.10 * 50.20
    and you are the current bid @ 50.10. There is a sell market order.

    Could this happen?
    1) The specialist sees the sell market order
    2) Bids 50.11 and gets filled.

    or is it impossible for the specialist to see market order and bid 0.01 higher?

    it the outcome the same w/ nasdaq stocks?
  2. For the most part. No, impossible.

    However I know there are some market orders which you route directly to Market markets that aren't automatically executed. For a MM to be filled he'll have to bid 1 tick better. Then can he screw you.

    f he's @ the same level w/ you according to the SEC's limit order protection act, if he fills his order and a customer order is at the same price, he has to give that price to the customer
  3. specialists and market makers are not gods.
  4. The specialist has API that allows him to see the order flow, and he can provide a price improvement for an incoming order.

  5. so you're telling me on all market orders, the specialist can see them before they get executed and adjust his bid / offer accordingly??
  6. Remember, the specialist's limit orders are at the end of the line (PPY), and they cannot take bid/hit offer, those orders are delayed. But I don't see any problems for the specialist to provide price improvements when he wants to.
  7. Hmmm,

    I wasn't aware that this happened. I know that in order for the specialist to get filled he has to bid / offer NBBO (+-) 0.01

    But let me get this clear because I wasn't aware of this...

    This is the order I thought.

    1) Someone Places a Limit Order
    2) A market order comes and takes out the limit order.

    But This is what you're telling me is okay...
    1) The specialist wants to get long.
    2) Instead of parking an order at NBB + 0.01. He has an order type that does the following... < When the next market order comes in... before it executes, this limit order will bid NBB + 0.01 and get filled>

    So if that is the case, then when using un-marketable limit orders to get in/out there definitely is a cost, the cost of not getting filled when the market is going to vs, always getting filled when the market is going down ---> assuming that the specialist can see the order flow and knows where the market is going, cause he's always going to take it when the market moves in his favor.

    * I thought that before the hybrid system the specialist matched the market order, but with it now isn't a market order immediate execution, so the specialist won't have time to slip his order in?
  8. If the specialist wants to go long and provide a price improvement, he has to bid the stock and be a part of top-of-book. Also, depending on the spread, he has to satisfy the minimum price improvement. This of course implies that NBBO (bid side) is on NYSE or the incoming orders is ISO/DNS.

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