NYSE liquidity quote/effects on price improvement?

Discussion in 'Order Execution' started by cornholetrading, Mar 6, 2003.

  1. Actually I am kind of confused with how it works right now because I have not seen it in action. From what I get from reading the SEC notes is that what the liquidity quote posts on the bid is the aggregation of all the bids from the highest inside bid down to the liquidity quote. So if 36 500 35.95 500 then 35.90 where the liquidity quote might show 10500 comprised of 9500 at 35.90 plus the 1000 shares from the higer prices. I think it is going to be used to more easily faciliate larger blocks to make up for the difficulties of getting large blocks done because of decimals.

    Now the bad side of all this looks like for the trader who tries and gets price improvement by putting bids and offers out. It looks like if you are willing to cross the market you might get better treatment or better treatment with market orders. Currently a market order can get stuck in your ass as the bitch gaps it down and fills you then moves his quote back up. Supposedly this same market order will now hit all the limit orders that are in the book all the way down. To me it sounds similar to putting in a SOES market order on nasdaq in theory. However what is bad is that if you have bids or offers out that he will not be batching all the orders in one print at the low price. From what I understand if the liquidity quote is at 35.90 and you have a bid at 35.95 then you will be filled at 35.95 and the rest of the order will be filled at 35.90 instead of now where you have the potential to get filled in a batched order at 35.90.

    This is my understanding of the new rule. I wonder how it will effect those who use strategies like enveloping orders or who try to get in on prints for large gap up or downs. What I am not clear on is what happens when the specialist goes to 1X1 if the liquidity quote is still shown or not. Also I am not totally clear on the effects of trading and price improvement for people putting bids and offers out during abnormal gaps to facilitate cleanup orders at the end of moves. Any comments from those with more info on the subject would be great. Also comments from firm owners such as Don Bright would be great too.
  2. I'm afraid you might be right. That's probably why they call the whole thing "liquidity", because it will definitely take away liquidity. If I don't get rewarded for keeping limit orders at the NYSE, why should I? Might as well post them on ISLD and at least be able to cancel them within milliseconds, not minutes.
  3. That is what I too was wondering about in regards to the ECNs in the more active stocks. If more volume went to the ECNs right now it would make sense to use them over putting limit orders on the book assuming I am correct about the impact of the new rule changes.
  4. ..."the bitch gaps it down..."

    Seems you've been there before....
  5. rtrading


    does anyone know when this takes effect?
  6. For those following the subject this was posted by Don Bright from a different thread.

  7. If my NYSE quotes and fills are any guide, it took effect yesterday.

    I am starting to trade Nasdaq again. EBAY is not that bad.

    At least scalping NYSE and Nasdaq on the same day makes it more challenging, because you constantly have to change from paranoid/Rainman-style to slow-mo Wall Street style.
  8. They have been testing it out on some stocks already, but I don't think the actual liquidity quote has been provided, however they seem to be trading as if they are posting one. I think someone else mentioned stocks like MWD, CCU, and MRK, but I am not entirely sure about that.
  9. What have you noticed about the fills? Price improvement or no price improvement? I have seen some wacky gap fills where it is not reflected in the current quote and there is a print of size way outside, then the inside quote is moved and sometimes not moved. However I did not have orders in to tell how the fills were for residing limit orders.

    Also I wonder where you would get filled if they widen the spread and instead of having a limit order out put a market order out. I wonder if that would make a difference whether you get grouped in with the large print instead of filled at your limit price assuming that is how it will work.
  10. First of all, I more often get a locked or crossed quote on IB TWS than I used to until a couple of days ago.

    Secondly, when the inside quote is 68.42 x 68.44 and I have a sell limit on NYSE for 100 shares at 68.49, I sometimes see several blocks going off at 68.50 without being executed. That is on stocks like BAC or RJR, which did not display this behavior before the change.

    And finally, if I get filled in the above situation, there will almost never be any price improvement anymore, occasionally I still get a penny, but I have not received one fill with more than a single penny price improvement since this whole thing started yesterday.

    One more thing, TMBR seems to be hesitant now as well. It happened a couple of times, when I crossed the market and normally would have received a TMBR fill, that my order just got sent to the NYSE, where it sometimes didn't even execute, sometimes exactly at my limit, which is not really what I was looking for.

    Like I said, Nasdaq is starting to look more and more attractive.
    #10     Mar 6, 2003