I noticed something this morning on AMR that has me really confused. There was a bid on ARCA at 24.7. Then an offer on INET came in at 24.7 and it was a visible quote. So the market at the time read 24.7 bid, 24.7 offered. This is in direct contradiction to what I have been able to produce with my own orders. In fact, the 24.7 offer disappeared and I sent an order to short at 24.7 on INET just to see if my order would also display. It didn't. What is going on? Suppose someone is long AMR - can they cross/match the market and their quote will be publicly displayed? Is it only short orders that have this display restriction? Confused.
I think I ran into it yesterday with a long sale. If you know the exact time, I can look at my ticker and tell you exactly what happened, but I believe, if INET is displaying an offer, ARCA is still able to come up and lock against it with a bid if it has it's execution link to INET disabled, or if the order was sent with proactivity disabled, and INET will not move away. I don't know what happens if the ARCA order attempts to cross INET. This happened with GM a little while ago. - At 07:51:51 ET, ARCA was offering 31x at 21.99. - Someone sent ARCA an iceberg order to buy at least 11K shares at 22.00. - ARCA printed 31x @ 21.99, then took another 5x and then another 1x from the displayed INET offers at 22.00, at which point the INET offer briefly moved up to an odd-lot at 22.20 but then immediately (within my clock resolution of 16ms) refreshed to show a 5x offer at 22.00. - 16ms later, ARCA moved in to 22.00 bid for 10x, locking against the INET offer for another 12 seconds, at which time INET moved away. So, it seems that this was a situation where INET and ARCA saw 22.00 as a non-locking offer or bid price, and then they both moved in at about the same time. It's not clear whether INET looked at the market and cancelled the offer 12 seconds later (pretty slow), or the user did.
I am positive the ARCA bid was at 24.7 and then the INET offer came in at 24.7. I.e., the ARCA bid already existed and INET matched. It actually happened more than once. Once at 24.7 and once at 24.6 while I was watching. I will get you the timestamp details in a little bit.
This deals with AMR. At 7:06:05 EDT, there was a bid on ARCA at 24.8. At 7:06:26 EDT, I entered a short order at 24.7 on INET to see if I could match the best bid on ARCA which was 24.7 at the time. I did this because at some point between 7:06:05 EDT and 7:06:26 EDT, an ARCA bid was the best bid at 24.7 and then a visible INET offer came in to match that bid at 24.7. The INET offer disappeared before I sent my order in. My order at 24.7 on INET was not visible.
I think it is pretty clear that the user cancelled the quote, not INET, because INET doesn't cancel displayed orders; and even if it did, it would do so almost immediately, not after a 12 second delay.
I'm suspicious as to whether it was INET locking ARCA, or ARCA locking INET. INET will not back away from a price once it has displayed that price, unless the customer who submitted the order cancels it. This is why I suspect that ARCA locked INET, not the other way around.
Anything is possible, but I have my doubts in this case. A bunch of bids on AMR came in on ARCA very early in pre-market trading (before 7:06 am EDT). They ranged from 24.9 in price down to say 24.3. Those bids never disappeared once they were entered. They just kept on getting hit. Since the bids were always there, the INET offers that appeared later were entered after the ARCA bids were present. I confirmed this using both IB and RealTick quote sources. The only explanation I can think of is that either there is still a way to cross/match quotes using INET or maybe the INET offer was a sub-penny price such as 24.705. However, I know through IB that I can't enter a sub-penny priced order for AMR.
INET will reject any order with a sub-penny portion in its limit price for a NYSE- or AMEX-listed security, so your hypothesis in this regard cannot be true. Perhaps one possible explanation for your observations is quote flicker. Perhaps the ARCA quotes, which appeared to be locked by subsequently appearing INET quotes, were not actually locked by INET. Perhaps the ARCA quotes disappeared for just a small fraction of a second, and then returned, so quickly that these flickers were never actually displayed on your platform, and weren't captured in time and sales databases. Perhaps this quote flicker created a brief window of opportunity, during which an INET customer was able to display a quote at the same price as the temporarily absent ARCA price. The ARCA price then returned and locked the INET price. INET has various advanced order types which might have helped produce this behaviour automatically, without any customer action to modify his displayed order price subsequent to the order's submission to INET.