A couple of people have been asking me lately about order routing. So here is a quick overview of Direct+ for NYSE stocks. Direct+, NYSE+, and NX all describe the NYSE's version of an ECN. Direct+ is an automatic execution as long as certain criteria is met. 1-The NY bid or offer that you are NX'ing (hitting) has to be the NBBO. (No ECN's or Regionals at the inside quote.) 2-NX will not work when the size displayed is 100. (Size must be at least 200 shares.) 3-An NX order can not exceed 1099 shares and must be at least 100 shares. 4-Most software prohibits it, but it is a violation of NYSE rules to use Direct+ on the same side of the market within 30 seconds of another Direct+ order. 5-Must be a limit order. 6-If any of these criteria are not met the order automatically becomes a DOT order (goes to specialist to be dealt with). Note- a Direct+ order will never get price improvement. See attachment for examples. Hope this helps. Comments welcome.
For those that want all the ugly details, you can get them here: http://www.nyse.com/pdfs/im01-4Microsoft Word - Document in 01-4.pdf This looks interesting to me: "Rule 123A.40. The specialist will not be required to fill any stop orders elected by an auto ex execution at the price of the electing sale in any instance where the specialist was required by Rule 1001(a)(iv) to take the contra side of an auto ex execution." So, if I read this right, it appears that an order can go off at your stop price and you not be filled based on that execution occurring. In the beginning, I had heard that if you did something like in your second example, but put in a sell price of $29.70. It would autoexecute the 800 shares at 29.90 and if there was more at a price between there and 29.70, the remainder would get auto-ex'd at that lower price. Had you heard anything about that?
4-Most software prohibits it, but it is a violation of NYSE rules to use Direct+ on the same side of the market within 30 seconds of another Direct+ order. Rule 1005: Orders May Not Be Broken Into Smaller Amounts An auto ex order for any account in which the same person is directly or indirectly interested may only be entered at intervals of no less than 30 seconds between entry of each such order in a stock. Would not this rule prevent all prop firms and institutions from using NX because of the direct or indirectly interested language?
Never seen that happen before. I would guess that in that example you could certainly get the specialists wrath and get a pretty ugly fill on the other 200 but I dont think it can happen automatically.
If I would have seen that I could have saved the 10 minutes it took me to write this thing. Thanks for posting it. Very comprehensive.