Do any of you look to hit the ISLD and INCA locks and crosses in listed stocks? For example, INCA bid 50.01 and NYSE offered 49.95 If so how do you play this type of ARB? Many times the Spec only shows 100 shares Phil
there was a thread on this a few months back about picking off Island traders in listed stocks... you can do it - there is substantial risk in that while the ECN posted market is true (with the exception of ARCA on listed stocks - when ARCA locks the market on a listed stock - it is bullsh!t and can't be traded, but that's probably because ARCA is a piece of sh!t) - the posted bid or offer from the listed side isn't real and doesn't reflect the true market. thus it is risky - on the one hand, you want to hit the ECN first because of the instant fill and because other traders are trying to do the same thing - but you know that the listed market isn't real - so in that sense you want to hit the listed market first, but then the specialist is going to hold your order and by the time he (if he decides to fill you) fills you, the ECN posted market has probably already been hit... so to answer your question, you can do it but there are less risky ways to make $$$ (at least IMO)
You hit the INCA with inca, and then slap the specialist. If the specialist has size, just direct plus him. If he has his book closed at 1, check open book to see if he has size there to get out within a penny or two. Arbs are great, and worth the risk of trying. just make sure it is crossed enought to make it worth your while of trying. Back in the day of trading Nasdaq, arbs were the coolest thing out there. You would just watch for INCA printing a sixteenth or qtr higher and slap that thing until it quit. You can do the same thing with listed, there are just not near as many opportunities to do so.