Discussion in 'Order Execution' started by jerryz, Aug 23, 2005.
How does it hurt a trader when a broker does this?
ummm, they trade against you
yes i've heard that before thank you. so now you are long and they are short. or you are short and they are long.
why is this more of a disadvantage to you? how is it different than when anyone else out there has a position opposite of yours?
if they can aggregate a lot of individual trader orders, they can see for example that 500K is bid in XYZ at 50.05, get long at 50.07 and if the market turns, hit the bids to get out. Risk 2 cents. basically, they have the ability to front run orders although it is technically illegal, it still happens.....
otherside of the coin
Market makers generally can see your stop orders. For example, if a lot of other people also have tight stops regarding the vicinity of your sell stop order, and also a lot of other buy orders , then it is possible that market makers can trade against you after peeking at the order flow. In that event, you will often see that your stop will be touched--but then the stock will keep riding without you.
i understand how a speciality can move the price to hit your stop. how exactly does a market maker do this? there are other market makers making a market in the same stock? wouldn't they all have to act in concert? when you put a stop on a Nasdaq stock, do all the market makers see that stop?
also, i was mainly asking about your execution broker peeking at your order flow instead of the specialist or market maker. does this matter? does this relate in any way to which exchange your execution broker sends your order to?
I thought it was a myth that market makers can see stop orders?
How do they know my order is a stop versus a buy or sell order?
I understood it to mean they might be able to see a pool of orders but then so can everyone else with an order book. It doesn't mean they know those to be stop orders or even if those orders will be there when price gets to it?
How would a market maker see stop orders other than those which he is holding (as a broker for a customer)?
Is it legal for them to use order flow to trade against you?? I think it is one of those things that they "should not" do, but they do it anyways if they can turn a profit.....any input?
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