For the past year or so I've been actively trading options using Schwab's Walk Limit order type to successfully find hidden liquidity within the spread. For the past several weeks, the liquidity that I'm used to finding has almost entirely dried up, across dozens of underlyings. This has happened with individual tickers occasionally, but I've never seen it like this: it was like a switch was flipped one random afternoon in early February. I can still get decent fills in a few select strikes for a few select tickers, but for like 99% of the options I trade, those types of fills have evaporated. Also FWIW, I'm not designated as a Professional Customer, or at least I shouldn't be - my orders/day are under 390. I have noticed that the exchanges on which my trades execute have changed dramatically - for example, normally the majority would take place on CBOE or PHLX, but since early Feb they've predominately moved to the MIAX exchanges. So I've been down the rabbit hole trying to understand what might have changed. There's so many potential variables at play that I'm not sure what real insight is possible, but here's a few possibilities I've been considering: 1. Schwab changed their PFOF arrangements, possibly in relation to the onboarding of TD Ameritrade customers that began this month. I assume my orders were being filled by liquidity providers that had a certain arrangement with Schwab, and maybe that arrangement has now changed. 2. My account has been somehow flagged by the MM/LPs who used to fill my orders. I don't know if this is truly possible, but there are a number of threads on this board where other users raise the possibility; notably this one, which interestingly, was posted in early February 2021 - the same week in which this happened for me this year. Unfortunately, @Speedtrader1 never returned with an update or follow-up. There doesn't seem to be a consensus on this board as to whether or not this is something that can happen, but it would certainly explain things. Does anyone know for certain that specific retail accounts can/can't be identified via equity options orders? 3. The liquidity is simply no longer there, due to some larger change in some other factor: volatility, MMs shuffling around their algorithms, who knows what. I can't find anything indicators from early Feb that are consistent across the affected underlyings, or any market news or events that might indicate something changed. If anyone can offer any thoughts or insight, confirm or deny this is the case with their recent orders also, or suggest other breadcrumb trails to follow, I'd be very grateful.
Strange story, but very consciously written down! To my knowledge no fundamental changes in the US option market in February. This behavior indeed sounds a bit like similar experiences when going over the 390 orders/d. Anyway, if Schwab (or you) made an error with the 390 o/d administration and consequently the designation as a Professional Customer that should have been started at 1-1-2023, not in the middle of a quarter. And you should have been notified (assuming there would be no double error on Schwab's side). Your point 2 and 3 are certainly not the case, something like point 1 could be possible but might show up on Google... Actually the only thing that is not clear from your post is if you mostly trade similar options or a broad range. With similar I mean if you for instance mostly trade a specific name (like SPY). Because if that's the case the change you see could be less of a mystery...
I don't know how Schwab's Walk Limit order type works, but not all US Option Exchanges support hidden order type. CBOE does but not MIAX. Not sure if this has something to do with your situation.
This is across a few dozen underlyings, a broad range of single stocks & ETFs. They're pretty all over the map and are in not correlated in any way that I can possibly imagine. This is "proprietary"; I probably won't get any insight until they release the 606 for this quarter sometime in April. I can only see the exchanges on which they execute, and I guess sometimes infer which exchange the limit is posting to via level 2 - Schwab doesn't offer DMA for options, all orders go through their smart routing black box. Is there a way to view routing data beyond this somehow? AFAIK, the Walk Limit doesn't involve hidden orders.
Sorry, maybe I misunderstood your original comment? What I mean is that to my knowledge, the Walk Limit doesn't submit hidden orders. All orders that I submit as Walk Limits post immediately on the lit exchanges. I'm defining hidden liquidity as fills that aren't apparent from either level one or two data - if you walk a limit order up or down through the posted spread, you can occasionally get fills inside the spread at a price that wasn't displayed in the books. Whether this is more often from hitting hidden orders, or a MM/LP (or other trader?) seeing the limit order come through and deciding to fill at that price, I don't have any insight into. I assume it's mostly the latter, though.
I don't know if this comes into play. At Schwab, I get no choice for directing my trades (exchange)...Both stocks and options (it's PFOF). I'm just a peon in their eyes. At Fidelity, I only get their routing for stocks. But with options, they offer almost any market/exchange or their routing (PFOF with possible price improvement). My two cents...
If an order is coming and hit your booked order, it will trade immediately with your order, without being shown on the book (being displayed). Only order sitting and waiting to be filled are displayed.