New order behavior - is it due to IB or INET?

Discussion in 'Order Execution' started by sprstpd, Apr 20, 2006.

  1. sprstpd


    In afterhours trading, I noticed that something changed on Monday, April 17th with respect to either INET orders or IB direct to INET orders. If anyone has any ideas, I would like to hear them.

    Here is an example scenario - the actual numbers may not be correct (can't quite remember the specifics):

    This morning in pre-market, HAL was bid at 83.65 on ARCA due to a Cramer pump from the previous evening. This bid was hit by someone (selling or shorting). Next, a bid on ARCA appeared at 83.64. I wanted to short this 83.64 bid. I entered my order, but because of ARCA's idiotic pre-market uptick rule, my order was repriced to 83.65. Because I wanted to get short HAL at 83.64, I decided to instead send my order to INET thinking that maybe someone would hit my offer there or maybe the ARCA bidder would switch his ECN to hit me on INET. Anyway, I sent an 83.64 short order into INET and according to IB, the order was active (i.e., the status bar was green). However, I could not see the order at all. It didn't show up on IB's quotes, it didn't show up on RealTick's quotes, and it didn't show up on INET's publicly viewable limit book on its website. It is as if the order did not exist, but IB was showing that it was active. When I switched my limit price on the INET order to 83.65, the order appeared on all of the quote sources just fine. It was as if INET was aware of ARCA's uptick rules and was not showing my order if it violated ARCA's uptick policy. Bizarre.

    This INET order behavior started occurring on Monday, April 17th. Before April 17th, the order would have shown up on INET as a limit order to sell at 83.64. I would have seen it on all my quote sources (IB, RealTick, and INET's web limit book). So my question is, did something change at INET that anybody knows about? Or is this an error with IB's routing? If I can't see the order, how do I know it exists? Who is at "fault" here? INET or IB? Any help would be greatly appreciated.
  2. MR.NBBO


    Yes, some kind of new glitch to be sure.
    I've seen it for about the same time as you started.
    I'm guessing IB. Here's why:

    I send out a SMART order on an ishare (uptick exempt), it hits a bid I'm trying to nail. It'll route ARCA or NYSE AMEX (not sure about others) and fill (my ask) & the bid I'm hitting, then if it's a flips to ISLD/INET, except there is no post of it, anywhere. Same as you experience, but when legally downticking with a short.

    Hard to pin this one down, either INET is getting routed to, and is mishandling/tagging orders or IB has a algorithim malfunction in the same respect. A couple more days will tell. Direct route (not smart) seems to solve even further I'm venturing it's IB.
  3. sprstpd


    Thanks for the reply. I'm glad someone else has seen this happening. Since it started on Monday for me, my initial guess is that it was IB's fault because they tend to roll new order logic out over weekends.

    However, even direct routing (to INET) does not work for me. Direct routing to other ECNs works fine.
  4. MR.NBBO


    I coulda swore I've direct routed INET, immediately after getting "phantom" smart/INET for a short....and been posted, with no change in tick. Hmmmm, this is definately a toss-up then.
  5. sprstpd


    Well my situation involves the uptick situation on ARCA so it is slightly different. It also involves crossing the market (I want my offer on INET to equal the bid on ARCA). Maybe IB is not letting me cross the market anymore, even in pre-market trading which would be really annoying. If that is the case, then I wish IB would just please let me direct my orders as I choose. Or maybe INET is restricting the order - I wish I knew where the problem lies. I hope it is at IB. If the problem is at INET, I'm sure they won't give a rat's ass about what I think.
  6. sprstpd


    One more thing. This has only happened to me on listed stocks. I suspect the problem lies with the pre-market/post-market uptick rules in place. But before, INET was never affected by ARCA's uptick rules. They were distinct ECNs. Either INET changed to be linked with ARCA's uptick policy, or IB is not routing my orders correctly.
  7. since when does inet short on downticks? one thing you must realize and this is a very big flaw with ib is there arca orders are not proactive and that's a huge huge. what it means if aapls falling i can short the tar out of it using arca's proactive orders as they allow shorting on downticks as either they short it on the downtick are they reroute it out to be shorted. read the 100's of notes here arca on nsdaq seem to allow shorting on downticks. and this is not just on fat naz stocks but they allow it on obscure stocks. now on nyse they don't allow it. ib does not reroute becasue it cost's .0001 per share to do that.your order diappearing has to be a chnage in ib's software
  8. sprstpd


    I am talking pre and post-market trading on listed stocks here. Previously, the uptick rules on ARCA and INET in pre and post-market trading have been something like this:

    Initially on both ECNs, you can't short at a price less than the previous close for listed stocks. So in my HAL example, the previous close (from the previous day) was something like 82.80. If you tried to submit a short order at 82.79, it would be repriced to 82.80 on both ECNS. No matter what happens during the pre or post-market trading session, this rule is always in effect for listed stocks that have uptick restrictions. (NASDAQ stocks are entirely different - you can short without an uptick on both ARCA and INET and you can short at any price you want, even below the close).

    Once a print goes off higher than the close, then you can't short at a price lower than that print. So in the HAL example, a print goes off at 83.65 on ARCA. I can't short at 83.64, my order gets modified to display ay 83.65. Now if someone hits the 83.64 with a sell order, then I am now able to short at 83.64. It is an uptick rule based on the last pre or post-market print on ARCA.

    Previously, I could short down to 82.80 (i.e., the previous close) on INET for the whole pre or post-market even if there were prints going off much higher. In other words, INET previously only had one restriction: you can't short lower than the previous close.

    Again, this new behavior I am seeing only applies to pre or post-market trading. Right now, it seems that ARCA's last print is effecting what kind of order I can submit to INET and have it display properly. My order doesn't seem to exist if I attempt to cross/match the market. Is it an INET issue? Or is it an IB issue? If it is an IB issue, please fix - it is aggravating.
  9. MR.NBBO


    Another quick note, that I forgot to include:

    My similar experience was DURING reg. market hours.
  10. IBsoft

    IBsoft Interactive Brokers

    When routing orders to INET IB enforces the "don't sell short on downtick" rule. (We have always done that; I will verify w/ compliance whether we still need to do so). This means that we raise the sell order price to be 1 tick above the bid for NASDAQ stocks and make it equal to or above the last sale price for the listed stocks.

    For ARCA we don't do that, as ARCA does its own rule enforcement.

    All I need is one example that you think we mishandled and we'll have a look.

    #10     Apr 21, 2006