Is it illegal to hit your own order?

Discussion in 'Order Execution' started by Daal, Oct 9, 2018.

  1. Daal


    Lets say you have two accounts, you set a limit order in a stock in one account and hit it in the other account. Is that against a rule? I'm referring to situations where the amount of volume is minimal (so wash trading is out of the question). What if the accounts are in different legal entities?
  2. Turveyd


    Don't see any legal issue or advantage from doing so, your just selling to yourself and buying from your self at the same time.

    Why, on 1 account is it a sell and your other a buy is the question ??
    gkishot likes this.
  3. Robert Morse

    Robert Morse Sponsor

    Yes, clearly against the rules. You may not trade with yourself or any of your accounts you are a control person on.
  4. destriero


    Self dealing is illegal.
  5. Robert is 100% correct, but what he didn't add is it's foolish.
    If your intent is to paint the tape it's illegal.
    If your intent is simply to move the position - you "may" be able to do that without going to an exchange. Chat with your broker about the ability to move the position.
    comagnum likes this.
  6. Overnight


    In the CME futures/options world, it is bad.

    There is a grey area there, however, about what constitutes a wash sale in futures. I spoke with the market regulation and business conduct committee departments about it, and their ambivalence was rather disconcerting. They basically told me that so long as it was not a "MATCHING trade", i.e., your long buy bid did not execute on the same tick as your short sell ask, on the same contract month, they would not be considered matching trades. But it seems a bit dicey at this stage.

    As for the SEC, not sure. Be wary, follow the advice of these stock broker dudes who know more about that side of the trading world. Like OMM there.

    As you can see by the link above, the penalties can be severe.
  7. There can also be an AML concern here and I suspect the brokerage house AML compliance folks might have to review a transfer between accounts. A long time ago this was part of the big options volume in Telfonas Mexico on the CBOE and the stock on the NYSE.
  8. Absolutely. If both the accounts are in your name, you will get a call from the compliance department and will need to submit a response (i've had a few accidents).

    If not, you'd have people/funds driving up the volume on illiquid/thinly traded stocks for purposes of manipulation.

    Now if you had a cousin/ close family member do it, i'm not quite sure how that works legally. I know for sure (not saying how) you CAN get away with it if you do it a handful of times a year. If it becomes a pattern, I'm sure that would be a different story. Technically if the legal entity is an arms length apart you really don't know where those orders are resting so the SEC would have a hard time trying to convict you until it became a trend.
    Last edited: Oct 9, 2018
    Maverick2608 likes this.
  9. There can also be an AML concern here if the two accounts don't share a domicile. Huge business in the 80s in Telfonas Mexico options on the CBOE and in the stock on NYSE.
  10. Robert is it still considered "Painting the Tape"?
    #10     Oct 9, 2018