I was asked of how to lock the market on a NASDAQ stock...Can anyone help?? How is that strategy implemented to be more specific?! Thanks
Locking the market simply means to make the inside bid and inside ask price the same. For example, assume that the market is 20.11 on the bid and 20.12 on the ask (one quote on the ask, 200 shares on ARCA). If you want to buy this stock, you could send an order to ARCA to buy at 20.12 and get filled immediately (depending on your brokerage arrangement, either you or your broker would pay the fee to remove liquidity on this execution). As an alternative, you could 'lock the market' by posting a bid to buy at 20.12 through INET or BRUT. In this case, you order would not be immediately executed, but you would be alone at the inside bid price, which has now 'locked' the inside offer price. This is what is means to 'lock the market', however in practice I see know reason to typically do this during normal trading. I have found that ever when rebates are considered, you are better off getting your order filled instantly by hitting the ask, versus posting a passive locking order and hoping that someone will fill your limit order. I've never heard of a 'strategy' based on doing this. Best of luck, -Eric