You are telling us that you saw a large sell order coming in day after day. Lets see what you are trying to do with this. You are waiting for some recovery to short the stock ahead of the seller, then try to cover your short when the seller is done. May i ask you who do you expect the sucker on either the entry or the exit point to be? The specialist normally has the responsibility to provide liquidity but he has no responsibility to let you front run him, or the institutional client... Conversely, if you wanted to provide liquidity, you would be more than welcome i'm sure. Take down a long position when the seller is selling at his lowest price, then work it off as some natural buyers emerge. I would say this is one type of trade which qualifies as honest living: there's no reason why the specialist would not let you in on this kind of business. Another way to look at it, in a purely electronic market which was perfect at matching buyers and sellers, you would not be able to do what you are trying to do. We all know reading tape is for the NYSE. In electronic market, the game is completely different: sellers chop up their big order into 200-800 share irregular pieces, route them into several different ECN's and you cant tell when they start or when they are finished. It only thanks to the specialist system you are able to read peoples intentions. .................. Sorry for the condescending tone, i am probably not half as good as you are at trading. But i have traded for some 10 years, and the trades that i have done before in stocks and the very different trades i am doing now in futures all revolve around buying from people who desperately want to sell and selling to people who desperately want to buy. No market maker, specialist, broker or whoever can stop you from doing that. And I dont see how it is different in intraday trading from any other.
Does anyone know of anywhere I could look (other than google searches for "order submission strategies" or things like that) to find more information on how the program trades are done involving nyse stocks and index arb. For example when someone buys futures and sells stocks via a huge program, what type of orders are they using to do this? How passive or aggressive do they have to be. How are they calculating slippage from market impact. If the program is truly an "arb" are they exempt from the uptick rule? I belive they are, no? In general how do these big program trades get done, I mean theoretically the mispricing's are very transitory so theoretically you must need to get the fills fast, however my own empirical evidence suggests aggressive ordertypes can eat your lunch if your not careful. Anyone have thoughts?
NYSE does the same exact thing and has done it for a while. Slow sell & buy orders dont run around flashing obvious 10k, they often show little lots like Nasdaq. A lot of these orders are done electronically through Open Book and even ECNs, particularly Arca. Reading the tape does not mean NYSE only. Reading T&S on Level II is a skill that is part of the whole toolset. That has to do order execution abuse. At any time, all possible orders can be at the mercy of the specialist. That is why ECNs keep growing and intitutions like Fidelity & Citi are building BSE as a possible rival.
Well, most arbs will be working blocks bigger than 1,099 shares so NX is not an option. As a result, I don't see the use of a limit order (even .25 cents or whatever into the market) helping the fill. I have tried doing both this and market orders and have come to like markets better due to precedence. My arb trading is not as sensitive to missing a fill as I can just take off the other side, but to an index arb a missed fill can mean a big problem.
I can't agree more with Hydro. Try to play VLO, X, HOV and you'll realize the abuse. The only chance you have to trade these stocks is when our dude is overwhelmed with institutional order flow, in which case he probably won't care about chopping day traders in and out. But for the most part that's his job now. Where else can he get the money in these days of low retail/institutional volumes? Let's see, maybe we're wrong. Is there anybody out there who can make any sense tape reading the stocks I mentioned above?
VLO is quite a particular bastard when it comes to upholding the "fair and orderly" market. Forget about trying to get matched up with incoming buy and sell orders, he'll front run the hell out of you and spread you 10-20 cents either direction. From what I know about X from a friend of mine, the guy holds orders forever. HOV is a pussycat compared to the two of those other guys.
Yes, I agree. HOV is the least worst of the trio. Maybe one day we should publish a list of specialists to avoid. It wouldn't take out any particuliar edge out of traders but just give a bad name to specialists who deserve it.