Picking off Island traders

Discussion in 'Order Execution' started by jennajameson87, Jul 16, 2002.

  1. Does anybody out there arb the island trades vs the exchanges?
  2. Bryan Roberts

    Bryan Roberts Guest

    yes but it is tough...there has to be some decent liquidity on island to do so. also be careful of the bids and offers that are exactly $1 off the inside bid and ask.....you really need software that will catch these orders that are too far out or else you will get robbed.
  3. Bryan,

    Could you elaborate on this a little? I don't understand what the threat is.
  4. Magna

    Magna Administrator

    Won't those trades get busted anyway?
  5. Bryan Roberts

    Bryan Roberts Guest

    well if you are trading in the heat of the moment and the inside bid on island is exactly $1 lower than the nyse bid, it's easy to mistake it for the "correct" price and hit it. i am told thats why these guys put those orders out there waiting for people to make mistakes.


    you may be correct as far as getting the trade busted, but who needs the hassle and worry that this event would entail!!!
  6. Tony01


    I don't regularly do it. But Monday had many opportunities in DIA. Several times during the day I was able to buy DIA thru Amex for 15-20 cents lower than ISLD's best bid. Of course every time this happened I'd quickly hit that ISLD bid.

    Usually there isn't enough of a spread between exchanges and ECNs to make it worth the risk. But I think the opportunities increase during times of high volatility like now.

  7. if you are filled $1 away from inside bid/ask call clearing firm

    The trade can be broken

  8. only if you are smart enough to call to complain

  9. I doubt you can still get a $1 on anything these days, market has become quite efficient, and even if you could get a $1, why would you bother risking your capital on the possibility of busting a trade? Example. You see the $1 arb opportunity via ISLD, so you hit it, then immediately cover that position. Thirty minutes late you receive a call that the trade has been busted, and now you have a position that you didn't know you had, and the market could have reversed in that time.

    Almost every arb. opportunity not on an ECN, but with MM and specialists will get broken around the $1 mark, doesn't make sense for them to give away that type of money when the range on some of the most liquid stocks isn't even half that. Only place were you'll get arb opps, is with the ECN, and most of the time its with NYSE securities from my experience.
  10. If you arb guys could tell me a few things -

    -what size do you look to move and what size is typically available (on DIA, or GE, or something else pretty liquid)? how much is too risky?

    -how long are you in the trade before time (usually runs out) - I mean, is it like scalping NVDA for 3sec or is it a longer window?

    -which trading platform do you use for this?

    Just some things that I wondered about when I read the post.

    Thanks alot!
    #10     Jul 17, 2002