Have you guys noticed that sometimes on a stock it will clear out all the new york book orders (inet, isi, etc) at prices a few cents away from the bid/offer but leave the island and arca orders there. So the person buying/selling is getting bad prices... Anyone know why or how this happens?
On the NYSE, this is from market orders. Market orders just sweep the open book; they don't route out to other market centers. Reg NMS, once fully implemented, will eliminate this. There's still some arbitrage money to be made from enveloping the inside market.