question on getting fast nyse fills

Discussion in 'Order Execution' started by joeyata1, Dec 18, 2005.

  1. an example was mo the other day. when the court decesion hit mo started flying. obviosuly anyone who hit sdot market got there orders held for at least 2 minutes as the speciliast either holds the orders or has so many orders it takes 2 minutes and 2 pts to get filled. my question is if one does arca market will they get a fast fill even in a fast market on the nyse. AND IF NOT HOW DOES ONE GET A FAST FILL ON NYSE STOCKS WHEN THEY'RE SKYING OR TANKING?
  2. No, you often won't get a fast fill on most securities, in that situation.

    This is because the NYSE quote will generally lag the true market, for your security, when that true market is running away from your order. So NYSE will often display the best quote, even though you cannot, in reality, execute against that quote. If so, the trade-thru rule will prevent you from hitting the bid or taking the offer at ARCA or elsewhere. You would then have to wait for NYSE to update its quote, so that you can get executions elsewhere. This is a serious defect in U.S. equity markets, and it is a big part of the reason why the SEC has amended the trade-thru rule. The new version of that rule, now called Regulation NMS, will go into effect at some point in 2006, and at that point, auto-ex venues will be allowed to trade-thru slow-moving manual quotes. Then, you will be able to get a fast fill, even when the market is diving or soaring.
  3. The new trade-thru rule, which will be called the "Order Protection Rule", S.E.C. Rule 611, will cover a small pilot set of stocks, starting June 29, 2006, and then this will be extended to all stocks, starting Aug 31, 2006. The existing trade-thru rule does not apply to Nasdaq-listed stocks, so it does not generate the same difficulties in trading of Nasdaq-listed stocks.

    for more information, and see also the sec's website, and learn to navigate it, for even more information.
  4. I'll have to watch for this. I have not noticed trading to stop on NYSE stocks where the spec quote is slow.

    Seems that ARCA and INET do trade under these conditions.
  5. I used to trade IWM, and in that security, equity trading would frequently be totally immobilized, on INET, ARCA, and everywhere, for up to 30 seconds, because the best quote was a bogus unexecutable quote displayed by the AMEX specialist, and no other trading venue could trade thru that bogus AMEX quote.

    If you look at T&S for other stocks, even those listed on NYSE, during moments when the stock is strongly and rapidly moving, you will probably see pockets of seconds at a time, during which no trades occur at ECNs or Nasdaq, because the trade-thru rule blocks trades everywhere else when NYSE is alone showing at least 200 shares at the NBBO. These delays matter and cost people money. The new rule will put a stop to this problem.

    A special exception has been made, by the SEC, for SPY and DIA, so that trade-thrus by up to 3 cents are allowed on these two issues. This greatly reduces or eliminates the problem for those 2 securities. The new rule, coming next year, will eliminate the problem altogether.

    Even if you don't notice this problem, it can still cost you money. I'm sure most traders aren't aware of it. I traded enough IWM to know that it had a dramatic impact on trading costs, fill prices, slippage, delays, etc.
  6. onelot


    jim, i think you have your facts mixed up.

    currently you can trade thorugh the nbbo on any exchange by directly routing to another exchange (on both naz and listed markets). this is why you see ecn's crossing the last specialist quote in a fast moving market. currently, if the specialist quote is stale, you most definitely can hit an ecn to exit or initiate a position outside of the nbbo... in fact you can do it at anytime if you so desire. to answer the original poster's question... this is how you would most likely be filled faster than the next specialist print, although usually there will be no bids/offers on the ecn's either and you will most likely have to be crossing to get a fill.

    the upcoming trade through rule will eliminate this ability... trade through's will no longer be allowed. the only exception is when an exchange disables their auto capablities and enables there manual auction market (ie, specialist working a big order with 100 shares on the bid). during these situations only will you be able to trade through. if the nbbo is nx-able, you will not. however, the implementation for the enforcement of this rule is broker-side... so it will most likely be heavily broker dependent on wether you will be able to trade through or not . for example, how will a broker know if it's gone to manual market? currently, i'm aware of no quote indication (with no live orders in the market) other than a 100 share bbo size (and possibly a large spread) to indicate that auto-x has been disabled... with the upcoming release of the hybrid market where nx-sweeps will be possible, 100 share bbo will not necessarily indicate a disabling of the auto-x. unless the nyse starts inlcuding that info in their quote data, i'm guessing most broker's will opt out on the conservative side and not allow any trade-throughs... although i hope this will not be the case.

    anyway, some things to think about.

  7. onelot


    This is incorrect. Currently, you can trade through NYSE showing any share size through another exchange (arca, isld, etc.). I almost never see what you describe, perhaps this is an issue with your broker. The new rule will not "put a stop to this problem" but more than likely make what you think you see much more of a reality.
  8. i'm confused as hell now. so if mo was $73.01x$73.03 nyse the court news comes out and nyse is corssed and arca jumps to $73.60x$73.65 can i throw arca markets and get fills? nyse is untradeable in fast markets. plus how will the new trade threw rules affect all this?
  9. onelot


    yes, if you route direct to arca you'll get filled at arca best market... assuming you have time priority, in this example you'll be filled at 73.65. if you route to a not so smart "smart" router... then your order will be sent to the nyse quoting 73.03 and who knows where you'll get filled.

    it's not untradeable, just hard.

    re: new rules... it's still unclear as it's really going to depend on how the broker's decide to implement their end of it and how well the nyse is able to communcate it's mannual/auto state. it's not really in their best interest to make that clear, so i'm not too hopeful. but, for the most part it's kind of wait and see.

    also, you have the arca merger thrown into the equation with the hybrid system... this could help or hurt, still not sure.

  10. I think I got my facts right. I think we do currently have a trade-through rule, and that we still have one, which does not permit trade-throughs for Nyse and AMEX-listed issues. Trade-thrus are permitted for Nasdaq issues. I forgot to mention that an exception, in the trade-thru rule, allows one to trade-thru any quote for less than 200 shares; and perhaps you observed such trade-thrus, and this misled you to believe that there is no trade-thru rule for listed issues? I did mention the special exception allowing trade-thrus of up to 3 cents for SPY and DIA, perhaps this exception might have misled you? The trade-thru rule does not apply outside of regular trading hours, so maybe this exception misled you? Or maybe my info is out of date, does anybody have a more definite knowledge of the trade-thru rules?

    NYSE and AMEX both have rules disabling auto-ex for any quote for 100 shares.

    AMEX, in 2004, amended its auto-ex rules to expand on the existing list of circumstances in which auto-ex is turned off. I won't even bother to list them. Just look up Amex Rule 128A. One of the exceptions is that for each security, the AMEX establishes a maximum spread size, beyond which auto-ex is disabled. The NYSE does not disable auto-ex based on the spread size.

    NYSE does have a rule disabling auto-ex of any quote more than 5 cents away from the last NYSE trade price.
    #10     Dec 19, 2005