Shorting listed via ECN's

Discussion in 'Order Execution' started by dcunited, Apr 13, 2004.

  1. Asked this to my own firm with no answer, waiting for replies from ARCA and Island, thought I'd check here.

    90% of the time whenever I place a short order on an ECN for a listed equity I will be represented at either the inside offer or the last print (or 1 penny above) so for instance if the inside of IBM is 90x90.10 and I have a limit to short at 90.05 I will be represented at 90.10. If there's a print at 90.07 my limit will be moved down to 90.07.

    OK this makes sense to me. However every once in a while my short limit will get filled at it's price regardless of the quote or where the stock is printing, so in the above instance if the spread is 89.90x90.10 and I send a short at 89.95, I will occasionally get a fill at that price. I've checked back to make sure there wasn't any random prints on both the NYSE and the ECN itself which would have 'lowered' the limit order.

    Am I simply mistaken and there had to have been a lower print to lower my limit order or are there extenuating circumstances which I haven't come across.

    Thanks for any info

    (Note: probably lost my mind but I could swear this happens more often in certain stocks such as UTX, whereas with GS my short orders NEVER cross the market)
  2. alanm


    This isn't an answer, but it depends on which ECN you're talking about. Each has different rules, and they've been changing alot recently, too. For example, I believe INET will mark up your order to a legal short-sale price that doesn't cross the market, but if the market subsequently moves to cross INET, it cancels your order instead of re-pricing it. Some brokers/execution platforms may also get involved, and do something like automatically re-send your order at a "legal" price.
  3. If the stock is trading on a downtick your short order would be rejected. I think the order is being posted at the ask (which you can do on a downtick). It could be your trading software doing this, it could be the ECN, I don't know.
  4. "It could be your trading software doing this, it could be the ECN, I don't know"

    Pretty sure it's ARCA which is controlling the price adjustment. From their site:

    "On a Listed Short Sales if the order is marketable and would not create a downtick the order is executed at the bid. If the order is marketable and would create a downtick, then the sell short order is displayed at the closest price that would not create a downtick and awaits an incoming bid at that price. As the consolidated last sale is updated with new executions, the system continuously recalculates the short sale opportunity and re-prices the short sale as needed."

    Still though I swear there are instances (albeit rare) which the order is executed..on a downtick..lower than the inside offer and lower then the last print. Perhaps I just need to stop drinking during mkt hours, or at least remain sober..ish.