Hi Guys, I have a quick question about Bids and Offers. I was watching a stock today on interactive brokers and noticed that the stock was trading between the bid and the offer at times without hitting the bid or taking the offer. How is this possible? Are these trades getting filled by hidden order?
And depending on the stock, many times bids/asks are there simply because of contractual obligations by market makers to provide them. They create large spreads between them to catch orders from any desperate buyers or sellers, while also not wanting to get caught themselves by some unexpected news. So if you see wide spreads between bid and ask then it may simply mean there are no (visible) buyers or sellers. While once you submit an order between bid & ask it may get matched either with hidden or peg orders, or quickly evaluated and picked by HFT, market making or other trading computers, often within milliseconds if not faster.
There are lots of Unconstitutional Hoax's going on to avoid locked markets whilst maintaining the auction price-time structure (which is unenforceable anyway if there is more than one exchange.) It allows any idiot to involve themselves so i'd ignore since you won't be able to keep track of the nonsense. Minimize (offer-bid)/volatilty per usd of notional and leave market making for brokers and pets.
''clearly if you want to buy or sell you shouldn't just do it, that would be stupid, you should leave an order somewhere in the money..'' if you give someone an order as soon as its closer than the visible bid-offer spread they are irrational if they don't trade against you. if you also give leverage+margin and make up your own securities secured against actual cash deposits then you are laughing.
IG offer a 4year TVIX forward above the spot price with zero funding at 10% margin. Yours in 10 bn please if the bid doesn't disappeared (there are no liquid tvix options). Easier than some other ideas you hear.
Dark pools and market orders sold for order flow. If I send an order through my broker, their required to get me the best execution. So the bid is .95 and the offer is 1.05, their required to seek out the best price from the SIP. I want to buy at market, my broker checks with their buddies who are market makers and they decide they want my order, the only way they can jump the queue is to give a price improvement, so instead of getting filled at 1.05 as I expect, I get filled at 1.04 or 1.45. The broker gets paid from their buddies for your order. Now their buddies are also market makers on a listed exchange, they now cut their spread by your price improvement. The stock market is a frigging mess between HFT moving liquidity across the listed exchanges and dark pools. This is how you see time and sales between bid/ask
WwwwwwWOW. Whacked-out paranoid fiction(s). It's 2019, and since the advent of SOES, retail traders have had the ability to bring up a DOM, watch the Bid-Ask spread move and jostle up and down the ladder, and when they think they see something nice, to pop in and grab it. "DING!" and it's gone. There is no need to assume plots, Dark Pools, agents of nefarious purpose, or anything else besides a shmo just like you, finger poised over {his} buy button. It's Friday. I'm cranky. I'm headin' for a beer. I suggest you do the same.
Dark pools were created to avoid HF MM seeing flow. You are responsible for getting the best price for you. Your broker is responsible to follow all related FINRA/SEC/Exchange rules. In this case, that includes no trade throughs. I agree about the market being a mess. However, my issues is with fragmentation, not market participants looking to make money following the rules that are set. There are just too many ECNs and option exchanges and because they really do not compete on price and service, there is no advantage to the auction market place, so the SEC should stop allowing one exchange to own many.
Somebody ought to invent a "smart router" that would not only take price, but price+commissions[!!] into account. Boy! THEN we'd have some fairness. Oooo! Waitttttt a minute! Let me check my notes here.......