Regular hours limit orders on IB that will participate in the opening cross

Discussion in 'Order Execution' started by fbell50, Jul 25, 2006.

  1. alanm


    Like sprstpd said, an order for 100% of the total opening print volume will almost always move that print, unless you happen to be in the same position as the spec would have been if he had to step in, and the spec is honest enough to stand aside.

    In the case you cite, that means there would have had to have been buy orders totalling 1600 shares, and just the spec selling those 1600 shares at the open. Your sell order for 1700 shares, had you given it to him, would have caused the spec to stand aside, and you would have sold 1600 with 100 remaining, or the spec would have taken the extra 100 if wanted, or he might have marked it down to 0.67 in order to fill the whole thing. Any other scenario, like 1600 in buys and 1600 in sells, with the spec not involved, and he would have taken the thing down at least 0.05 in order to buy your 1700. And this is a fairly tightly collared stock - other, more volatile stocks, and you're going to give up a lot more.

    What I meant by missed opportunity was to question what you miss by just giving the order to the spec. In this case, with a stock that is so incredibly illiquid, if you really have to trade it, you really have no choice but to give it to the spec, because he's the only guy that gets any order flow. The only way you'll get filled on an ECN is if your order is mis-priced and can be picked off by the spec or an arb - there are almost never natural buyers or sellers on the ECNs for stocks like this. Forget about saving pennies - you're going to get picked off for a few cents and you just have to live with it. Much more in a stock that has some wiggle to it.
    #21     Aug 15, 2006
  2. flbum


    Thanks for the insight. It seems that I need to consider market opens and other (sometimes wildly) mispriced prints unavailable to me... at least not on AMEX. Perhaps I can still get some less profitable fills when there is a trade at the market open if I can get the re-route option working. IB support said that they think that it is working now and to give it another try.

    With my trading strategy, I never really have to trade a stock at a particular time. I just increase my profit if I can trade more often. I wait for my limit prices. I’ve been trading this same select list of illiquid stocks using this strategy for 6 months now. I’m pleased with the results so far. Perhaps I’m too easy to please. I was just hoping to get some of those mispriced trades to enhance my return. I guess that won’t happen.

    Thanks again alanm and sprstpd for your valuable insight.
    #22     Aug 15, 2006
  3. sprstpd


    Never know til you try. But if the stocks are illiquid, your opening order will most likely affect what price the stock opens at. Tell us how you fare and good luck.
    #23     Aug 15, 2006
  4. alanm


    Quote from flbum:
    Thanks for the insight. It seems that I need to consider market opens and other (sometimes wildly) mispriced prints unavailable to me... at least not on AMEX.

    Whoah there. Not necessarily. Just be prepared for the possibility that you may not get what you see. Much of it depends on the spec. If he's got a bunch of these little no-volume stocks, and one big volume stock, he'll probably leave you alone and focus on the big stock. If he's got nothing else to do but squeeze every penny out of these stocks, you'll just have to give it to him.

    My primary point is that, unless you see other natural buyers and sellers posting bids/offers on the ECNs, send your orders to AMEX.
    #24     Aug 16, 2006
  5. flbum


    IB support has solved the pre-open re-route problem for my AMEX stocks. They went back and forth with me a few times till they got the bug ironed out. I was pleased with the efforts that they made and the communications while solving the problem.

    Unfortunately, due to AMEX rules, I'm unable to re-route both buy and sell orders on the same stock to AMEX.

    I requested SMART routing for my orders and had them become active at 9:22 AM. I had previously had them become active at 9:25 AM. However, there is some sort of IB software issue which is preventing orders from being re-routed if they become active at 9:25 AM. I'll experiment with other times to see if I can get closer to the market open and still have the re-route work.

    Additionally, the re-route feature is only specified to work for listed stocks. So, NASDAQ stocks are not routed to SUPERSOES.

    So, 13 of my orders were successfully re-routed today at 9:27:00 AM. The other 11 of my orders were either on the other side of BUY/SELL on AMEX or were for NASDAQ stocks. I'm not trading any NYSE stocks.

    It remains to be seen if I'll truly benefit from the re-routing in practice. The jury may be out for a while on that one due to the thinly traded nature of my stocks.
    #25     Aug 23, 2006
  6. alanm


    Glad you got something fixed.

    Do you ever actually get a fill on the ECNs pre-market? If so, is it favorable (i.e. do you wish you had waited for the AMEX open)? If not, why not skip SMART altogether and route to AMEX directly?
    #26     Aug 23, 2006
  7. I agree with alanm. What I do is route directly to the primary market. You can use a simple market or limit order entered anytime after market close the previous day. As long as you <i>don't</i> select "Regular trading hours only" it will participate in the opening cross.

    Since you are using a good-after-time order just before the market opens, you don't seem to be interested in premarket fills from ECNs. So, why do you want to use SMART routing at all?

    The advantage of a directed order is that it guarantees that you participate in the opening cross as long as your order is marketable at that price. A SMART routed order might get filled premarket, probably at an worse price than the opening cross since there's less liquidity in the premarket. The only reason to trade premarket is if you actually value time more than price, which doesn't seem to be the case for you.

    #27     Aug 23, 2006
  8. flbum


    I want minimal exposure outside of RTH. I always use limit orders. So, I get my price... but getting a fill of 6 shares was enough to convince me not to trade outside RTH. The few traders who are postings orders outside of RTH on my stocks seem to have commissions built into their limit prices to account for the small odd lot fills.

    My execution exchanges for the last 5 trading days were:
    8 AMEX trades
    5 ISLAND trades
    1 ARCA trades

    Most of my fills are split between AMEX and ISLAND. I get a few fills on ARCA and CAES. I wouldn't want to give up any of my fills to capture the relatively rare profitable market open trades in my list of stocks.

    I could route directly to AMEX or SUPERSOES for the open and then change to SMART after the open. However, I would have to write some software to do it. I've been avoiding API so far. Also, I would face order cancellation fees for my directed orders. Since I place so many orders to get a small number of actual fills, cancellation fees would really affect my trading costs.

    Ideally, I would like to see IB implement the re-route for SUPERSOES also.
    #28     Aug 23, 2006
  9. fbell50


    I posted this last night to IB's BB under the trading topic.

    I submitted a request to implement SMART Nasdaq Regular Trading Hour limit orders that participate in the opening cross through my sales rep today. In my new and very limited experience with IB I’ve found that NYSE limits submitted with the RTH and Pre-open Re-route options, will execute on the opening cross if marketable, but there is no corresponding method of doing this with Nasdaq stocks.

    I have assumed that this is a feature that many would like to have. Am I correct? My proposal follows. If you agree speak up. Perhaps we can get IB to do it.

    A Proposal to implement SMART Nasdaq Regular Trading Hour limit orders that participate in the opening cross.

    SMART currently supports NYSE Regular Trading Hour (RTH) limit orders that also participate in the opening cross, which I will refer to as “Full RTH Limits” (by selecting the RTH + Pre-open re-route options). I consider the NYSE open the single most important and liquid trading point in the day. It is too important to be ignored and SMART fully supports it.

    Unfortunately Full RTH Limits are not supported for Nasdaq. Prior to the implantation of the Nasdaq opening cross in December 2004 this was understandable. But things have changed. The Nasdaq does have an opening cross. It is not as liquid as its NYSE counterpart, but its liquidity is still impressive. For example, the average volume on the open in June for MSFT was 377,200, INTC was 384,100, CSCO was 312,900, and SBUX was 49,400. These opens are trading events with significant liquidity. I have enumerated examples of very liquid stocks, but even for less liquid stocks the open remains an event of significant liquidity relative to the stock’s normal daily volume. SMART should not ignore the Nasdaq opening cross.

    The alternatives currently available are unsatisfactory. One method would be to use LOO and if the order was not filled submit a regular limit order. This opens a time gap where the market could open at or above the limit price and then move through it before the new order could be submitted. I have had many situations with a different broker where this would have happened to me. Another method would be to direct a non-SMART order to Supersoes, check the price after the open and cancel/replace the non-SMART order with a SMART order. With appropriate checking for close prices, this avoids the time gap problem, but places a significant implementation burden on each customer.

    Please provide a method that supports Full RTH Limits for Nasdaq stocks. The obvious method to me would be to extend the “Pre-open Re-route” option to include Nasdaq stocks. This would work well for me, but I am a new customer. Perhaps this would be too disruptive to existing customers and a new method would need to be devised.
    #29     Aug 23, 2006
  10. flbum


    What he said...

    Bravo fbell50! Well said. I agree wholeheartedly. That is just what I need too.

    I would like to see IB implement Full RTH Limits for Nasdaq stocks which includes the opening cross. The use of the Pre-open re-route capability applied to Nasdaq stocks would be a good way to implement this capability. If it would potentially be disruptive to established customers, a separate check box in the SMART configuration could be provided to enable pre-open re-route for Nasdaq stocks.

    I'm surprised that the re-route worked for NYSE stocks with RTH selected and permitted you to capture the market open. I've been communicating with IB support to get the re-route working for my AMEX primary stocks. Since AMEX stocks fall into the "listed stocks" category, they are supposed to be re-routed per IB's specification when the re-route feature is selected. Although that feature now works for AMEX stocks too, I found that the re-route did not work unless my order was active more than 5 minutes outside of RTH. I would prefer to not be exposed to pre-hours trading. That also means that I have to edit my basket of orders every day with a new date on the GAT and GTD times.

    Based upon your statement about NYSE, I will try to select RTH only and Pre-open re-route to see if I can capture the market open on AMEX with DAY limit orders while avoiding non-RTH exposure.

    I will also post on the IBS BB to ditto your request.
    #30     Aug 23, 2006