When you get price improvement (on stocks)...

Discussion in 'Trading' started by Option Trader, Mar 24, 2008.

  1. ...would you say "be thankful" and keep selling, or "hold off" because this stock is going higher?
  2. First of all, you have to be damn certain you see price improvements because tape reading is very tricky these days. And it's not necessary that the stock will go higher. For example, the specialist may dump the position to free up cash (and he wants to do that fast).

    Recently, I saw numerous price improvements one cent below the ask (around 5k shares total), and then the price dropped half a point. The specialist had been selling in front of a strong floor order.

    I'd say just keep looking...
  3. No contradiction. I was speculating that if you are selling & getting price imrovement the stock is likely to go higher, & you brought a case where you are getting price improvement buying & then the stock tanks.

    B) Interesting how you note the specialist as the party who offers price improvement. Is that ever done by other parties also like MM's or floor traders?
  4. a) I wasn't getting price improvements, I was watching. My point is that the specialist sees only a fraction of the picture these days, so you cannot rely on the fact that if the specialist is buying then the stock going hire or vise verse.

    b) On NYSE the specialist is the only party that can provide price improvements. Period.
  5. Interesting. In another thread, where I was mentioning I was getting price improvement for the same trades with TOS & not with IB, IB traced the source of the issue to being ATD (automated trading desk), and that IB would look to enable this by them as well. This involved DRL, a NYSE listed stock. What then does ATD have to do with getting the same specialist to give price improvement?
  6. You have to define the price improvement. Is it an improvement over NBBO, or on a particular market center?

    Usually, when people talk about price improvements they mean executions on NYSE.
  7. If what is being offered by a particular market center is better than NBBO, then I would want to call that "price improvement"--unless you've got another name for it.
  8. Well, technically you cannot quote a price better than NBBO and not be a part of it (exchange self-help is one of few exceptions)...

    But NYSE may hold an NBBO say on bid and the specialist stepping in and provide a price improvement, resulting the print inside of NBBO spread.
  9. When you say "exchange self-help", do you mean market centers?

    See what TD Ameritrade says about themsleves:
    "Where your order is executed can impact the price you pay for a stock because your broker generally has a choice in where to route your order. We pursue the highest quality order execution with the various market centers. And because TD AMERITRADE is one of the largest order routers in the industry, we’re able to analyze thousands of market orders and put our knowledge to work for you every time you place a trade."

    So we kind of suspect that if you get price improvement from a specialist what might happen next; but what about from these various market centers?

  10. Yes.

    Don't forget that TDA may have an ability to cross orders internally (and then print it on a regional exchange).

    Not sure that you can look at the tape from a market center (other that NYSE) and see prints (other that cross/late prints) inside of BBO.
    #10     Mar 24, 2008