"The ECN" versus trading books

Discussion in 'Trading' started by optionsplayer, Jun 16, 2002.

  1. I have seen some different comments made in several posts over the last few weeks and wanted to tie in a few ideas here for consolidation purposes.

    THis scenario would assume that your individual trading costs are minimal at a professional level-- around a penny per share or so with no pass through or additional ticket charges.

    I have noticed both on the NYSE and the Nasdaq, that many stocks still trade with a decent bid/ask spread even with the recent move to decimalization.

    Take for instance a QLGC or even a TYC. On my generic level II or communications screen or whatever software application you want to call it or run it -- you can clearly see the best bid and best ask up on the screen. THere may very well be a .05 or .10 difference between these two entities. At this specific point in time, if you could see actual "behind the scenes" orders on some other book, shares may be up for offer or bid between this spread. THere have been many times when the ask has appeared weak to me, yet a huge order will go through on an uptick with the stock barely budging. Or maybe a decent amount of orders will go through on the tape, between the spread with no change in the bid or ask, etc.......

    In any event, my question is this. Given your trading cost of 1 penny share and the ability for a professional level trading platform to see not just an ECN but all other books and orders out there, how probable is it to see a TYC up for offer at $10.40, while someone on a different book may be trying to buy it for $10.43 -- meanwhile the bid ask on level I or whatever shows bid of $10.39 and ask of $10.44. Since the Nasdaq is an electronic marketplace, does the nature of this platform quantify it as more applicable in this arbitrage like scenario....or are the NYSE floor specialists at a disadvantage here??
  2. <i>to see not just an ECN but all other books and orders out there</i>

    You are never going to see all of the orders out there.

    And if shares are offered somewhere lower than they are bid elsewhere and you actually get filled on the buy order, the stock is probably going down.