is there an order type that makes my order sitting at NBBO?

Discussion in 'Order Execution' started by trend2009, Jun 28, 2020 at 9:06 PM.

  1. trend2009

    trend2009

    one of my strategy is similar to market maker, that is, buy and sell order sitting on nbbo waiting for others to hit me so that I can capture the ask-bid spread. when market moves up/down, my order will also move along with the nbbo. currently my algorithm will adjust the order whenever nbbo changes. IB reminds me that my order/fill ratio is too high, and it asked me to lower down. I do not know how to lower down. I used relative order, but when bid moves down, my order does not move down with it, so it does not fill my purpose. any thoughts?
     
  2. Yes, consider a strategy other than competing with MMs that have access to nanosecond infrastructure and god level quoting? :) I assume these aren't options as you can't do buy/sell orders with options, at least not on the same exchange. You also have the 390 rule which makes the strategy a bit moot.

    Are these thinly traded stocks?

    IBKR is able to not charge for non executing orders, because they don't get abused like this.

    You could consider optimizing your alg to simply put in the orders when they're more likely to be crossed. And that way you get your fill ratio up

    Or, you know, become a real market maker.

    Maybe there is a broker that is setup to handle retail flow like this, but I'm not aware of one. This sort of activity is really meant for MMs.

    Retail customers are supposed to add authentic liquidity, what you're dong is verging on spoof trading.
     
    Last edited: Jun 29, 2020 at 12:57 AM
  3. Last edited: Jun 29, 2020 at 1:28 AM
    trend2009 likes this.
  4. JSOP

    JSOP

    What does IB mean your order/fill ratio is too high? I have never heard of this one before. I thought when you have an order, you are supposed to have it filled. That's the whole point of submitting an order?? :wtf:

    And honestly if there is a huge enough of a bid/ask spread, why can't us retail traders capture some of that spread? Just because we are retail traders, we are supposed to be always free meat waiting to be slaughtered by the MM's? That is ridiculous. IB's just pissed that you are earning commissions instead of paying them and at the same time getting better fills. I used to use passive add-liquidity orders in order to earn some commissions and IB after a period of time would hold my orders on their server instead of sending them to the exchanges and only send them to the exchanges at the very last minute so my order would become a market order and would get hit with the highest of commissions. I complained to them several times but they claim it's because the price moved some bull**** excuses. LOL
     
    Last edited: Jun 29, 2020 at 5:00 AM
  5. Metamega

    Metamega

    Problem is your orders always going to change last. Your going to get filled on the bid mostly when your the ask. Since most retail orders never hit the exchange to begin with, your waiting for a market maker to hit your bid, which is only going to happen when your the ask.

    Power to you but I’d find a less structural competitive area.
     
  6. Exchanges don't like traders submitting 1000's of orders that are not going to be filled. Regulators don't like it as they think you may be manipulating or as mentioned above spoofing. Brokers don't like it as you eat up their infrastructure which can be a substantial cost and for firms like light speed that sell their flow, the HFTs purchasing their flow probably hate dealing with this as well but I only say probably as the pattern is so evident it is easy for them to game or trade against you.

    https://www.marketconductrules.com/risks/placing-orders-with-no-intention-of-executing-them.html

    Definition
    entering of orders which are withdrawn before execution, thus having the effect, or which are likely to have the effect, of giving a misleading impression that there is demand for or supply of a financial instrument, a related spot commodity contract, or an auctioned product based on emission allowances at that price. Placing orders with no intention of executing them may also be illustrated by the following additional indicators of market manipulation:

    • orders to trade inserted with such a price that they increase the bid or decrease the offer, and have the effect, or are likely to have the effect, of increasing or decreasing the price of a related financial instrument;

    • the high ratio of cancelled orders (e.g. order to trade ratio)
    Surveillance
    Effective implementation of surveillance alerts for placing orders with no intention of executing them requires capturing the following trade data:

    • trade data

    • order and quote data including unexecuted quotes and orders
    Order to trade ratio is often used in surveillance alerts to detect placing orders with no intention of executing them. Layering and spoofing and advancing the bid are special cases of placing orders with no intention of executing them.
     
  7. Metamega

    Metamega

    Except if your an HFT market maker, then you have the exchanges create the “Hide not slide” I believe it’s called order type created.
     
  8. trend2009

    trend2009


    my order is different, i have all intention to be filled but reluctant to pay the spread, so i want my order to move with NBBO.
     
    JSOP likes this.
  9. Doesn't matter. Hundreds of updates without a fill - ticks off lots of the boxes in this highly regulated world.