INET (Island) cancelling orders

Discussion in 'Order Execution' started by alanm, Feb 18, 2004.

  1. alanm


    I trade listed stocks after-hours on the ECNs.

    Since the beginning of the INET/INCA integration, I've been seeing a problem on INET with quotes that are flashing constantly, generating huge amounts of unnecessary quote traffic. As the different groups of stocks were migrated to INET, the problem affected each of those groups. Some days, the resulting quote flood is so overwhelming that I have to scratch the stocks that are doing it from my list.

    When this started, I contacted INET and they said they had a problem where people were sending DAY orders after 16:00, and that was the reason for the rejects. Apparently, there's a different Time-In-Force value for after-hours orders. Now, however, the problem seems to be related to a change at INET with regard to short-sales. Now, if you send a short-sale order that is priced below what they consider a legal up-tick price, it briefly goes live at the minimum legal price and is then cancelled. They used to leave it live at this marked-up price, which worked well.

    So, what is happening is that someone out there is running an automated trading app that doesn't know about this change, and they are not watching what it is doing. When their app sends one of these mis-priced orders, it goes live briefly and is then cancelled by INET. Their app then re-places the order again, and this loop goes on indefinitely, more than once per second, for many stocks.

    Tonight, a good example of this is the sell order for 5000 AWE at something less than 13.721. The order goes live briefly at 13.721, is cancelled, and then re-submitted. The cycle has been repeating every 0.8s or so, for the last several hours.

    INET is simply ignoring the problem, and I'm considering taking it to regulators to get them to do something, since it's costing me money and aggravation every day. I'm sure I'm not alone.

    PLEASE - if you are running an automated trading program for listed stocks after-hours, or know someone who is doing so, ask them to look at what their application is doing and fix it! It's not at all difficult, and will prevent any undue attention from regulators in an environment where we don't need it!.

    BTW, for the last few days, someone has coded their application to start pennying the guy making the inside markets in many of these listed stocks. The formerly inside guy then pennies him, etc., until they reach a limit and drop back, and then it starts all over again. It's one thing to do this sort of thing away from the inside market, but doing it at the inside creates tons of quote traffic that others (including me) have to process and respond to, not to mention making an otherwise-quiet marketplace feel like the chaos of the Nasdaq at the open, and masking any actual activity my natural buyers and sellers. There has to be a better solution. I'd welcome the opportunity to talk with those involved.
  2. EricP


    This doesn't sound right to me. My understanding was that the uptick rule is only in effect during regular market hours. After hours (pre and post), the uptick rule is not applicable and the ISLD orders should be accepted into the system. I could be wrong, but this sounds fishy to me.

    Best of luck with having the quote jockey fix his system.

  3. Island has always
    and Arca too (?)
    canceled out any attempt at a new short unless it was higher than the prior days settlement

    in Listed 3 letter names

    my 2 cents ....

  4. alanm


    All due respect, but this is where I live. For listed stocks, after-hours, until a few days ago, Island simply marked up short-sales to the lowest legal short-sale price* and then put the order up. They did not reject the orders.

    ARCA implements an actual uptick test based on the last ARCA trade, just as though it were regular market hours.

    *If the NYSE closing trade was an uptick, the closing NYSE price. Otherwise, the closing NYSE price plus 0.001.