Express ACATS via ECN?

Discussion in 'Order Execution' started by kubilai, Jun 16, 2005.

  1. kubilai


    Has anyone thought about using an ECN in after-hours for transfering a block of stocks from one brokerage account to another? Just wait for liquidity to dry up, setup two opposing orders, click submit and viola, instant transfer for the cost of one round trip commission (no slippage). A lot faster than ACATS for a small fee. With the wash sale rule, even your holding time won't be affected. Is this legal in regular trading accounts (non-retirement)? Does it work in practice?
  2. sprstpd


    What if someone beats you to your own order? Or if you try to take yourself on ISLD but someone has an invisible order in between?

    Even with the wash sale rule, if you had a profit on the position you would have to pay taxes on it because of this swap. Only if you had a loss would the wash sale rules apply, correct?
  3. kubilai


    I can make it so it's nearly impossible for someone to beat me to my own order.

    For example, say my stock closed at 10, and I wait until 7:30PM before I do my dirty deed. Say the spread on the ECN of my choice is bid 7, ask 11. So I prepare a buy order on the receiver broker at 8, and a sell order on the sender broker at 8 too. Submit the buy order first, then the sell order. Under normal conditions, a bid 20% from the closing price will never be taken for the whole night. So my transaction likely succeeds. Even if someone jumps the gun, I'd be happy to get a 20% discount on this stock frome someone else (likely to be busted though).

    Now if you're right about the existence of invisible orders, my whole scheme is busted. I know people can put up reserve orders to hide their true size, but they can hide the entire order too? Perhaps there's an ECN that doesn't allow invisible orders?

    You're right about the wash sale rule. It only defers losses. Too bad, though for a short term trader, it doesn't matter.
  4. MR.NBBO


    Feel free to explain what your doing to the regulators who will be breathing down your neck for self crossing trades. They'll be all over you for it.
  5. kubilai


    I know self-dealing is illegal in retirement accounts, for obvious reasons. I have not be able to find anything that says it's illegal for regular accounts too. Care to post a link?
  6. sprstpd


    Put your orders on ARCA.

    There is still the possibility of someone sending in a limit buy at 8.01 right when you send in your sell order at 8.00. Very unlikely, but possible.
  7. MR.NBBO


    The price would likely send off flags, an $8 transaction creates a false print, and price manipulation is illegal, even if you don't profit. Cross it at $10 (the closing) and you'll only get hassled by regulators. You're walking a very fine line, and a very dangerous one.

    I'd doubt your brokers would stand for it long, their compliance department would likely close your account to avoid problems.
  8. kubilai


    Ok, I give up on this rotten idea.

    I found the relevant reference under "market manipulation law". Here's a link:

    It's definitely illegal, and not worth being busted for. Time to close this thread.
  9. OK so It is illegal for stocks but is it also illegal for futures and futures options?

    You could use the exchange to transfer funds without wire charge fees by posting an offer on an OTM option and then hitting it from another account.
  10. alanm


    I see it happen routinely. I doubt anyone would notice, much less care, particularly if you do it at the closing price, for which they could hardly accuse you of "painting the tape".

    INET has hidden orders, so you definitely don't want to do it there.

    ARCA is not supposed to have hidden orders, but I've occasionally seen what appears to be evidence to the contrary. Today, in fact, I sent a 100-share buy order to ARCA and my execution report indicated that I removed liquidity, and the order was executed in one piece, yet there was no ARCA offer that low. There is no evidence that the quote was stale, either.
    #10     Jun 16, 2005