Would anyone know what the difference between a SelectNet liability and a non-liability order is and what hours during the trading day both operate?
Let me show my ignorance by replying (I trade NYSE almost exclusively): SelectNet gives the market maker the right to post SelectNet bid and asks that they don't have to honor, ie they can back away even after you preference them on SelectNet. This is called "non-liability ". This is a particularly nasty problem, since the MM has 30 seconds to make that decision and can hold your order during that time. After the introduction of SuperSOES it's my understanding that all SelectNet order are "non-liable", ie SuperSOES is the only trading avenue where MM bid/ask are commitments. Others please chime in and make corrections!
Close but.............. Specifically, a Liability order is an order that is sent directly to a Market Maker via Selectnet that matches the MM's quote (ie same/better price and no more than his quoted volume) AND, the MM is not in the process of already filling a similar order and/or changing his quote when the potential liability order is received. If the MM is not filling an order or changing a quote when such a preferenced order is received, it becomes a liability order which the MM MUST fill or else he could be considered to be backing away. A non-liability order would simply be an order preferenced to a MM that is seeking price improvement or more volume than the MM is quoting. These preferenced liability orders caused problems for MM's as they would often "do the right thing" and fill them, only to find out that they were simultaneously "SOESD" while filling the SNET liability order (remember SOES orders are autoexecuted against MM's at the inside prices and the MM's do not know until after the fact that they were SOESD. Thus, a MM who was offering 1000 shares (and truly only wanted to sell 1000 shares) could actually sell 2000 shares in this situation known as "dual liability", and there was nothing they could co......except back away from the preferenced orders. To deal with this problem, under SuperSOes, all selectnet preferenced orders are now required to be oversized by at least 100 shares, meaning they must be at least 100 shares more than the quoted volume of the MM being preferenced. THis automatically makes the order a "non liability" order giving the MM the choice on whether or not he wants to fill it. Meanwhile he can be getting "SOESD" to death under the zero second interval delay SUPERSOES system.......but that's another story.