Shorting on the NYSE

I rarely trade listed issues. But I feel that exposure to this marketplace would be advantageous to my trading over the long term.

I posted a request on guidance for shorting listed issues – the best advice I got was to enter Market orders.

Today on the open I entered a short sell mkt order on SEI – I did not get filled until 10:29, at 10.64. There seemed to be plenty of opportunities to get filled in the .70’s. This turns out to be the lowest available short print (as of 11:30). The market turned and ran up from there to take out yesterday’s high, where I closed the position. Now I had limited risk – only traded 100 shares – because this is more of a learning trade than anything else.

Tell me, is this typical specialist behavior? It appears that my order was held for the worst possible fill. I’m not complaining mind you – I’m just trying to learn the rules on the NYSE.

Regards/greg

 

Sorry to hear that, and you have every reason to complain.

To me, it looks like he's on vacation and his assistant forgot to check the time stamp on your mkt order (2 min rule- he either fill you or reject you).

Again, I am against mkt order and only use it when I am panicked, even in that case, I will cancel it if I don't get filled in 3 min.

Good Luck

 

I rarely trade NYSE......but have found the same problem when trying to trade PDX once.....order was held for 20 minutes,,, then filled......Trading isld to isld might be a better way to not get held up..........

 

Just one of the benefits of 60's technology. I've stopped trading NYSE because I make money consistently on the NASD, and with liquid issues I don't have problems with HUMANS mucking up good trades. I still don't believe specialists are any more concerned about making a market than MM's on NASD, but that's an endless debate. Just let the market take care of itself and get human greed and inefficiency out of the middle. Thats my opinion.

 

Greg if you entered that on the opening. Than call your clearing firm. You will have to go through time and sales to find the first few upticks. Persist and persist to get the trade done earlier at a better price. This isn't the norm.

I am a NYSE trader. 95% of my trades on it.

One problem is the volume in your stock is especially low. Most specialist are better on their fills than that.

The 2 minute rule Doesn't apply to short orders. Info posted above is incorrect.

Robert Tharp

 

Robert:

Thanks -- i did not think this was the norm, but geesh, every time i try shorting on listed issues -- it feels like my order goes into some frigging black box!

Yeah the stock is pretty thin -- but i wanted to control as much of the risk as i could -- i've watched it for a few days and could live with the spreads, and when a stock trades thin you get to see every move -- kind of like watching ice melt. Not very exciting, but a great way to learn -- and that is what this trade was -- a learning trade.

I actually cancelled the first order for a potty break and entered another when i got back -- but there were definitely up-ticks with both orders --

The difference is probably 10 bucks! really not worth the hassle, and like i said -- i'm really not upset -- i just want to know what to expect in this marketplace.

You gotta love the naz for shorting! uptick bid, lift it with a limit order and BAMM! your short (if you get there first) -- nice and clean, In a thick market you can even get filled on the offer.

regards/greg

 

Since the NYSE has rules to follow, it is imperative that traders know and understand those rules. You will always get proper executions on the NYSE (as has been our experience over the last couple of decades), BUT...and a big but it is... you should never turn over your "hand" to another, even the Specialist. Never use market orders, we teach that as the "Prime Directive" and when you fully understand how the system works, you will know why. We rarely enter "short sales" but do rely on bullets and conversions when going short.

You never want to have someone "buy from you" or "sell to you" - you want to "initiate" all of your trades (hitting bids, taking offers), thus allowing you the luxury of going with the momentum rather than against it.

I'm sorry that you had a bad experience with your listed trade(s), and don't look to your broker for explanations of what transpired, because they rarely know anything about how things really work.

 

Thanks Don for "weighing" in on this topic.

You state:
"BUT...and a big but it is... you should never turn over your "hand" to another, even the Specialist. Never use market orders, we teach that as the "Prime Directive" and when you fully understand how the system works, you will know why. We rarely enter "short sales" but do rely on bullets and conversions when going short. "

This is exactly what i was trying to do -- understand how the system works, and since i am just a retail trader i do not have access to bullets and conversions.

Perhaps you could shed some light on just how the system works.
I know the uptick rules -- it is the mystery of the book and it's depth that confound me i think. I used limit orders the last time i tried to short a listed issue (AXP) and that experience is detailed in another thread (posted to the wrong forum). It was suggested then that Mkt orders were the way to go when going short.

Any insights would be appreciated

regards/greg

 

Don't be concerned too much with the depth of the book on the NYSE. Rarely do we ever see more than 25cents movement without 10,000 or more shares.

If you're going to enter short sales, go ahead and put in a limit price below the bid (or at the bid). I do this when entering pairs trades (doing the "hard side" first). You will find that very often the Specialist will go ahead and print a few shares a penny lower (thank goodness for decimals! once again!!), and then take out your short sale. This will at least limit your potential for "manipulation" losses.

As far as how the "system" works during the trading day (different rules apply for openings and closing trades), it is based on the simple uptick trade rule (as opposed to the uptick BID rule used on the OTC markets). When we teach tape reading, one of the main components is "following a short seller down" by actually helping them by hitting bids (using bullets, etc.), and then after hitting several bids on the way down, we buy the short sellers stock, thus making a good profit.

Just a couple of points, trying to help out.

 

Don,

When you say that you don't tell traders to use market orders were you referring to using market orders for short sales? Do your traders often initiate buys using market orders? Just wanted to clarify this...

Leland