NYSE stock question/specialist

I was watching today NYSE stock (before traded Nasdaq mainly). I can see bid/ask 32.50-32.6 and on time and sales you can see prints going @32.18 and also 32,55 etc. At the same time chart does not reflect this (low of the bar is not 32.18) After couple of this trades we are back to 32.5/32.6

How is this possible that when bid/ask is set you may have trades executed 40cents below? I sometimes can see bid being dropped just for one trade and then back to normal?
Can specialist change bid just for one trade (take advantage for example of market order??)

Why charts would not reflect those trades?

Thanks
Paul

 

You might be seeing all trades occuring in NYSE stocks. NYSE stocks trade at various exchanges. I use AT Financial for quotes and I have to type ".N" at the end of the symbol to get the quote and trades for the NYSE. For example "AOL.N"

N: NYSE
T: Third Market
P: Pacific
X: Philadelphia
B: Boston
M: Cincinatti
C: Chicago
A: Amex

I only care about the NYSE becuase I that is where my oreder execution system routes my orders.

 

Yes those prints seem to be the other exchanges which are always ( almost) below the bid and above the ask. The nyse T&S also has lots of totally wierd price prints that can be 60.00 on a 35.00 stock.

From what I see they can and do take larger orders outside the posted b/ask. I guess thats what they called getting "pennied".

I use qcharts ....and notice that many trades will not post to the chart after hitting T&S. Not sure why.

Nasdaq t&s has alot less garbage trades( out prices) on it than nyse.

For both I will occasionally filter out anything below 100 or 200 sh to get a better idea of order flow.

RC

 

Paul =)

when you see trades on your time and sales for NYSE stocks that are not within the bid and ask, and are not incorporated into your chart then its usually a trade that is for some reason being reported late, or some type of error message.. when trades are broken some data feeds include these transactions in the T&S too.. out of the market trades occur for a number of reasons.. one possibility is that the trades were executed via an ecn.. for example someome bidding or offering on island away from the inside market is hit.. another possibility is that its a trade from a retail client of a "pay-for order-flow" type broker.. those are often sent to regional exchanges like chicago instead of nyse which may not be quoting the same market as the nyse.. yet another possibility is that an order from a brokerage house was filled by their trading desk from the firms inventory at a slightly outside the market price..

about the specialist backing away.. sometimes when a specialist has a large order in his book near the current market, he will step in front of it with a small bid or offer.. specialists are not allowed to trade their own accounts at a particular price in front of customers orders.. so sometimes they will step in front of the price by a few cents.. let me give you an example.. say MO is trading at 40.32 x 100 and 40.39 x 23,000.. there is a large order to buy 60,000 shares on the books at 40.30.. a buyer comes to the specialist post and asks for a quote to sell 40,000 MO at the market.. the specialist will look at his book, and quote 40.30.. if the order is recieved, the specialist will back away and fill the entire order at 40.30 for 40,000 shares, and will likely then step back in front of the remaining 20,000 shares at 40.32..

the nyse is by far the fairest market to trade stocks.. if only superdot were as fast as an ecn =)..

good trading

-qwik

 

To add to qwik's response:

By definition there cannot be any out of market executions on the NYSE. The NYSE is a centralized continuous auction not a fragmented OTC market like the Nasdaq. As such price and time priority are abided by at all times. These characteristics can be construed as providing for a fairer market than Nasdaq.

BTW, in qwik's MO example if the bid for 100 shares at 40.32 had been a customer order it would have been filled with the block to be sold at market and price improved by 2 cents.

 

This is simply about the mechanics of a market order. If you submit a market order on the NYSE you are due an immediate fill at a price that can be accomodated given the demand/supply equation in the stock at that point in time. It's the specialist's task to maintain an orderly market and therefore participate in the print as a buyer or seller of last resort if natural demand or supply cannot accomodate the market order without causing an excessive gap. So the resulting print represents the fair auction market price at that point in time.

In the example you are referring to a bid for 100 shares at the inside obviously would not support a 20k block sale at the market. If that order had instead been submitted as a limit sell order priced at the inside bid it would have received an execution for 100 shares and the remainder would have been placed on the book as the new inside offer.

 

I've learned the hard way, that you can't fire off 10k+ sell/buy orders. Especially on the illiquid things I trade. At the same time, if you try and sell em 1k at a time, you will get a worse price on those shares than had you just sent in the 10k market order. When in doubt, I'll give him that k or 2 to get out, cause I think I will get a better agragate price. The specialist is fair, and usually honest. He does what he has to.

 

Magna,

oops, you are right, i meant to say seller..

exactly.. the specialist will usually back away from his quote in a case like this and fill the entire 40k block at the same price.. its important to understand that for the most part specialists are spread traders.. they buy stock on the bid and sell on the offer.. unless the specialist had reason to believe that there would soon be an order to buy those 40k shares a couple levels up, its doubtful that he would want to risk his own capital by buying that much stock himself.. this is particularly true on lower volume issues..

exactly.. its not that the specialist doesn't want to buy stock at 40.32, he does.. he just didnt want 40k shares.. remember that these guys are keeping a two sided market.. so they are trying to balance the amount of stock they take on the offer and on the bid..

whats "fair" about what the specialist did is that he simply matched the sell order that came in with the best bid on his order book.. what happens on the Nasdaq if you want to sell 40k shares? what happens when an offer for 40,000 shares shows up on INCA? all the market makers scramble to leave the bid because they see a seller coming in.. in fact, if the other mm's get a selectnet order for a large block, they will try to short the stock in front of the sell order.. thats why mm's play so many games when they are trying to move size.. in the case of the specialist, he isnt allowed to short the stock at 40.30 and fill the sell order at 40.20.. the specialist isnt allowed to front run a customers order..

yes, it is true that if the specialist is forced to become the buyer of last resort, he will try to get the best price possible within NYSE guidelines.. generally, in a quickly falling stock the specialist is required to print at least some stock at each price interval on the way down.. once the sell order is filled, of course he will want to take the stock back up to where he can sell the shares he accumulated on the way down for a profit.. think of it this way, on the Nasdaq, market makers arent going to buy your shares while a stock is tanking.. since they arent buying your shares, they could care less how far the stock falls.. on the NYSE, you have one person controlling where the stock trades and this person is committing capital every level down.. i read somewhere about a trader that once had to go 17 points outside the inside market to get out of a falling Nasdaq stock.. that would never happen on the NYSE..

of course, specialists are crafty devils and will try to hide their intentions just like any market player.. but since the NYSE is centralized and there is just one person controlling the stocks price, the tape and their habits will eventually give them away..

good trading

-qwik