Can hidden orders be hit across different exchanges? For example, if I place a hidden order on EDGX, and someone places a market order ARCA, could my hidden EDGX order get filled? Or are hidden orders "hidden" to all other exchanges?
Yes. The prop firm I traded for had proprietary routing orders that scanned dark pools before filling on ARCA/NYSE/NSDQ
It is my expectation that a "NON-DISPLAY" order has no protection from REG NMS. You will only be represented on that one ECN. The other ECNs should have no knowledge of that order. To be a "protected bid or protected offer", it must be displayed on the consolidated market data feeds.Hidden or non-display orders are not. Bob
Thanks, Bob. That makes sense and is important to know. I guess I was under the wrong impression believing that mid-point peg orders would be the most likely to fill without taking liquidity, but since those are hidden, I guess that's not the case. Do you have a recommendation as to the type of limit order most likely to fill?
Unfortunately there is no universal answer to that. If you work an order by pegging to the bid, you might never get an execution and miss out on a move. If you always take the offer, your commissions cost and quality of execution might suffer but you will have your position in place. I was not much of a directional trader and focused much of my career on option market making. When I hedged my option orders, they were always done with limit order on the bid for sales, and at the offer for buys. Never market orders. I wanted to lock in a profit from my edge on the options. If your expectation is to make a few pennies from scalping, you need to worry about every fraction of a penny. However, if you have a time sensitive desire to get long or short, you need to be aggressive with at least a portion of your order. I like to enter a trade with around 25 % of my expected position quickly, then work the balance. That way if I'm right, at least I have something. I hope that helped. There is really no best response to that question that covers every strategy or situation.
Great article, Daal. Thanks for posting. One thing that article mentioned was casting a "hidden order net". Do you or anyone have experience doing this? For example, if I wanted to buy 100 shares I guess I could route to two exchanges and then cancel the one that doesn't get hit. But lets say I'm trying to sell 100 shares, how is it possible to try the order out on different exchanges at once?
I wouldn't recommend doing what you suggest (two orders to buy 100 shares each if you only want 100 shares), you might get overfilled and then you will have to sell 100 shares and pay commissions/be exposed to market changes. Same thing on the sell side, you CAN send 2 orders to sell 100 shares even if you only have 100 shares. The second order would be short sell order. If you get overfilled you would be short the stock. I don't really like this, it kind defeats the purpose of hidden orders (decrease your trading costs in a hft world). In your case I would just route one 100 share order for the most active ECN/Exchange of that stock and that's it
A hidden order net implies to me that you would put 1/n shares on n different exchanges simultaneously, all hidden. So if you had 1,000 shares to buy, put 334 on ISLD, 334 on ARCA, 333 on BATS. As Daal said, maybe just putting all the shares on the most liquid ECN would produce the same result with less effort.