IB's Island ECN ShortSale Uptick Rule Question

Discussion in 'Trading' started by hsanson, Apr 4, 2001.

  1. hsanson


    Today I shorted 100 shares of SUNW by placing a sellshort order at the bid price on IB's ISLD ECN, SUNW was in a DOWNTICK, the order stood there open for about 7 seconds and got executed, then SUNW plunged several cents until I covered.
    My questions are:
    1) Isnt my trade violating NASDAQ's uptick rule ? ?
    2) Is IB's JTWS software capabable of enforcing the uptick rule so I dont have to be watching upticks/downticks ?
    3) Does ISLD ECN automatically enforce this rule ?

    Def, your comments here would be much appreciated.


  2. gh1


    I also have a question about shorting using the IB platform.

    If i am trading a range and am long 100 at the bottom of the range, can i sell 200 at the top and be short 100? Or do i have to enter two orders?

  3. hsanson,

    My assessment would be that when you sent in your short on a downtick through ISLD, it automatically notched it up 1/16 and posted it as an offer, which was subsequently hit 7 seconds later.

    In my experience with IB, in order to convert a long position to short or vice versa, you need to send in two separate orders. Don't ask me why. Def may be able to shed light on the reason.
  4. def

    def Sponsor

    IB takes care of the uptick downtick rule. In the case mentioned w/o seeing the audit trail or full details I believe zboy is correct on how it was handled. I can't imagine how you would expect an ECN to support the short sale rules - how would they know your position? The broker is required to make sure all orders are handled properly.

    As for two orders. I think the issue has to do with the short selling rules and internal margin issues.
  5. dlincke


    You can flip from short to long with a single order but not vice versa since it would be impossible for IB to enforce the uptick rule for just part of an order.
  6. The ISLAND ECN can and does suppport uptick rule so you aren't in violation. You hit the offer and not the bid which was an uptick. It doesn't take much anymore now to get that.

    Greg it varies by companies. Overall I would write IB to see what they say. YOu are probably going to have to do dual orders

  7. dlincke


    The Island ECN does enforce the uptick rule for NYSE stocks but not for Nasdaq stocks. With Nasdaq stocks it is the submitting broker's responsibility to ensure compliance with short sale regulations.

    According to some other people I've heard from, IB in fact does not seem to enforce the short sale rules for Nasdaq Island orders.
  8. trinfo


    The uptick rule does seem to get enforced - I think people are just getting lucky fills and trying to come up with magical ways of explaining it. Application of Occam's Razor is recommended.
  9. rfoulk


    Oh boy.

    Some trading software is set up poorly for shorting -- like
    Cyber and Tradescape. They abort immediately if there's no uptick at the moment you press the button.

    And some software does the sensible thing -- like Castle and IB. They sit and wait for an uptick instead of aborting.

    How hard could that be?

    Cyber's and Tradescape's software designers don't have a clue. IB and Castle, and hopefully others, have figured out that a computer is much better at some things than humans -- like waiting for one silly little uptick.

    No one's cheating. The other guys are just a little dense!

  10. And if you execute orders through Realtick, you can actually short on a downtick (of course if the NASD were to review the trade they would bust it). Unless Realtick fixed this bug in their execution algorithms, using ISLD or Selectnet (this didn't seem to work with any other ECN's), you could send in a short sell order 1/16 below a posted ISLD bid (or other ECN if using Selectnet). If it's a downtick, Realtick will pop up a message box saying "Cannot short on a downtick. Would you like to adjust price up 1/16?" You click yes, and boom, you just shorted at the actual bid price despite the downtick. Since I don't execute through Realtick anymore, I don't know if it's still possible, but it at least used to be.
    #10     May 3, 2001