Today I placed a limit order to sell short CUB (AMEX) at 46.19 with TD Ameritrade. At least 15 minutes after I placed the trade, it spiked up to 46.38 but I didn't get filled. I talked to someone in TD Ameritrade trade resolution and he said it was an "intermarket sweep". Is this legit? Does it have anything to do with being an AMEX stock? I've never had anything like that happen to me before. Any insight would be appreciated.
I believe it's their "smart routing." Limit orders with most of the big name retail guys don't actually sit on the ECN. Look at the level II's next time you trade and see if you can see your own bid or ask. Try a thinly traded equity if you need to.
From my understanding, a broker or ECN only sends their best bid and ask to Level 2. When a big market order comes through, it's within market rules for them no t fill you if you aren't represented on Level 2, even if it trades above/below your offer/bid. Like I said, out of the 1000's of trades I've made, that was the first time that ever happened to me. I think regulation NMS has something to do with this, I'm looking into it now.
According to RegNMS, only the top of book is protected, and some exchanges (for example NYSE) have special order types that allow to target their books only and do not route out any part of order - Intermarket Sweep and Do-No-Ship orders.
According to http://www.nasdaqtrader.com/trader/tradingservices/regnms_factsheet.pdf : InterMarket Sweep Order (ISO) This order indicates that the order has already checked all other protected quotes before coming to NASDAQ. It trades on NASDAQ and does not route out to external markets.
The problem I have with this is that if they have already checked for protected quotes, then they don't need to put out an ISO order. Its a bit of a scam. but so is everything these days.
They very likely are good prints. With reg nms, market makers/exchanges only have to match the inside market for the size indicated, then they can run through their own book (applies to nyse, amex and nasdaq stocks). ie. if you place a mkt order to buy 5000 shares when a stock is 45.99 x 46.00 (1x1), the mkt mkr holding your order has to fill 100 shares at $46, then they can clear their own book, temporarily running up the price. The rest of the market doesn't have access to these executions. Its kind of a scam to begin with, nevermind the fact you don't have access to the mkt maker's books to verify they are filling those orders accordingly.
Just wondering where is the scam? RegNMS is for your own benefit to get the best price available. Nobody in right mind will shoot market order 5000 size with only one lot available on the top of book. Every serious desk has algos that would work a size order.