Time and sales -> Above the ask and below the bid?

Discussion in 'Order Execution' started by JoshDance, Feb 8, 2011.

  1. How is an order filled above the asking price? Isn't the asking price, well, the asking price? I would think that once all resting sell limit orders are filled at a level, that the ask ticks up to the next level, thus making it impossible to get filled above the ask (or below the bid). Someone please help my understanding here!
     
  2. Don't you know ??

    It's the new economy baby ....yeah

    economic books don't apply, old rules don't apply

    free for all

    enjoy the good times

    soon selling will be illegal

    god knows selling doesn't work, so it might as well be illegal.

    You just buy and make rich. All those traders doing charting, stupid guys
     
  3. Bob111

    Bob111

  4. After a bit more exhaustive searching, I have found this great response to basically the same question:

    http://www.ninjatrader.com/support/forum/showpost.php?p=117581&postcount=7

    It essentially confirms what I suspected--that there's no such thing as truly above the offer, or below the bid, it's a matter of data reporting. If my understanding is way off, someone please set me straight.
     
  5. On top actually some excahgnes report new bid/ask only after acomplete trade. A purchase of a large contract may wipe out 1-2 levels of bid/ask, but this is not reported until AFTER the trade reports, so for the computer the trade happen outside KNOWN bid/ask for that time.
     
  6. Thanks for your original post (on NT forum I linked to) and for this. Very helpful.
     
  7. There are "upstairs" trades/pre-arranged trades which do not go through the order book at all. They are, however, printed as trades. For example, someone wealthy wants to sell 10M shares of something with a float of 12M shares. If this broker can work out a deal with someone to take the shares, the price is not going to be at the market. It is not going to be anywhere near the bid price. They will negotiate a specific slippage, print it, and the buyer now has to work the order. The buyer is hoping that he has banked enough slippage to make up for the unknown slippage of actually distributing it.
     
  8. This is the major problem. There is no centeralized marketplace and therefore no NBBO. All trades are supposed to be reported and posted on the consolidated tape even though the trades were executed off exchange and never exposed to the best bid/ask. Before I was aware of what was going on by the brokers transacting orders 'upstairs', I documented numerous trades, as low as one round lot sometimes a nickel or dime, from the best reported price. I reported this to the regulatory agencies. I never heard anything from them. The rules only require brokers to 'make an effort' to obtain the best prevailing price for their customers not that they have to obtain the best price. Fragmentation of the marketplace and allowing orders to be executed away from the market is costing the public millions of dollars each trading day.
     
  9. Well, here's a real life example. Just the other day I was watching MCD, which is a NYSE stock. I saw an order get filled ABOVE the current asking price. First, I thought it must have been a bad tick, so I did a history on the time and sales the next day, and sure enough, the trade got filled. So I called my broker and asked their trade desk how it was possible for that trade to get filled above market. He said that particular trade was on the Pacific Exchange, which is NOT recognized by NYSE as far as the NBBO (National Best Bid and Offer) is concerned.

    If what you saw was a limit order that was sent to the Pacific Exchange on a NYSE stock, that may explain it. Or perhaps there was another reason, not sure.
     
    #10     Feb 9, 2011