ECNs + Uptick Rule

Discussion in 'Order Execution' started by Babak, Aug 23, 2005.

  1. Babak


    I've read all the threads and posts (searched ARCA uptick) and I'm really confused about something that has been talked about ad naseum here.

    That is, whether an ECN - ISLD and ARCA are often named - allows you to sell short with no regard for an upbid or uptick. Some say that the ECNs ultimately have to follow the exchange rules, some say that the ECNs can ignore the uptick rule only when/if both sides of the order originate from them and still others say that you have blanket immunity from the uptick/upbid rule when using ARCA (some also say ISLD).

    Can anyone offer the correct answer and separate myth from fact?

    Much appreciated.
  2. it seems some loose broker dealers are allowing shorting on downticks. many software programs don't distinguish between a shnort sale and a sale so software treats all as a striaght sale. of course its not legal but it happens
  3. sprstpd


    Regular market hours or pre/post-market?
  4. Babak


    aaah, I should have clarified this. I'm greedy, so ideally, I'd like to know for both conditions, regular market hours and pre/post.
  5. alanm


    Also, there are different rules for (listed) NYSE/AMEX than for NASDAQ. Some time after the Reg SHO pilot became effective, I posted the rules for listed stocks pre-market and after-hours.

    I doubt any brokers are mis-marking short sales as long sales any more - the regulators are very much on top of that, and fined a number of them. Many front-ends do not distinguish to make it easier on the trader. The back ends, though, know your position and correctly mark the order when it's sent to the exchanges. Some (like IB) will even correctly split up the order into separate sell-short and sell orders if you're reversing from a long.
  6. Yes, you can short on a dwontick thru ARCA. I do it almost every day.

    The reason they can do this is because ARCA is its own exchange (they bought the Pacific Exchange) and has the ability to set some of its own regualtory guidelines. But you definitely can short on a downtick thru ARCA.
  7. bdon


    Sorry this is wrong. You can only short on a downtick those stocks which are part of the Pilot program.

    What you can do on arca and inet is get short ahead of the nyse but it still requires an uptick.

    ie last price at nyse is 29.50, then an ecn ticks for 29.45, you can now short on arca or inet at 29.46. and be stuck waiting at the nyse still at 29.51.

    the exception to the uptick rule for NYSE stocks on the ecns is routing to the NASDAQ which then can technically short a downtick as long as its a penny higher than the inside bid.
  8. qazmax


    yes this has been covered many times and there is much confusion that arises because people are not clear asking questions, and other people are misinformed answering them. Of course, the ever changing market place and market rules do not help everyone stay informed so it is good to bring this up periodically to see if things have changed.

    To help please try to be specific.

    Are you speaking or normal market hours, or extended market hours.

    Are you speaking of Nasdaq or Listed.

    When you say "ECN" do you mean both sides of the trade or just one side?

    The most common confusion comes from people who claim they short a listed stock through ARCA with no uptick. If both sides (buyer and seler) are on ARCA then this is possible. If ARCA has to route the order to the NYSE to find the other side of it,then NYSE rules apply.

  9. Babak



    thanks for the reply. Ideally, I would like to know what the rules are under all possible conditions, pre/post, NYSE, Nasdaq, internally matched by ARCA (or other ECN like ISLD I've heard can also let you short on uptick), externally matched (short initiated through ARCA but routed and matched to say NYSE or Nasdaq or other ECN), etc.

    Also, for those using IB. It seems that if you route a ssale to SMART it will route to ARCA and (under the conditions cited, whatever they are, whether blanket or limited ignore the uptick/upbid) get you the fill. So you don't need to specify ARCA, right?

    Thanks guys, I'd really appreciate it if we could put this baby to bed finally.