It seems to me that most of this "price improvement" comes from the fact that the specialist is showing bogus bid/ask. I know I have entered a bid or ask that was much better than what was being shown, and it was never displayed. When/if the specialist filled my order, it would have given the opposite party "price improvement". I have also had price improvement many times, but why not just show what the real price is? I also don't like to wait to see if the specialist is going to give me a fill or not. I like Nasdaq/ECN's where you can see what the real bid/ask is instead of what the specialist decides to display, and you can take it out instantly instead of asking the specialist to be so kind as to sell you a few shares. I don't do huge size, so that might have a lot to do with my experience. I have basically given up on NYSE for the time being. To each his own.
I just did an experiment with QQQ (the only thing I am currently trading that is on NYSE). I transmitted a sell order for 400 shares on NYSE, and a sell order for 600 shares on Island (to close a position).These were market orders which I almost never use. The Island order executed in two 300sh prints at 38.902. Two seconds later, the NYSE order executed in one 400 share print at 38.90. I don't know if that tells us anything or not (other than NYSE is slower). I use TWS.
I thought Island only accepted limit orders? I don't think I have ever tried to use a market order with Island...
Actually no. The price improvements come from huge orders from instuitions usually. The majority of prices at the bid/ask are some little trader while the real size is sitting behind that. This is due to the decimals and someone putting a penny above or below the specialist. Different specialist have different patterns. Actually on NASDAQ I can hide my order so that you can't see it also. One thing if you are putting in order better than the bid /ask are you using DOT? or are you going through a differernt execution route. All of my orders are immeadiately shown but that is due to DOT going straight to his post. Notice something? The majority of traders trading at the pro firms prefer to trade NYSE while the majority of the retail traders prefer the NASDAQ. I know traders who are heavily profitable at both so the exchange doesn't really matter. They are very different systems though. The AMEX isn't the NYSE as the rules are very different. I stay away from the AMEX.
Vinny - QQQ was primarily listed on the AMEX. NYSE has dual listed this product, however you're correct, ISLD only accepts limit orders.
I use IB TWS, so I guess it must enter the "market" order as a limit order on Island with a really wide limit. As I said, I almost never use market orders, so I'm not really sure. I entered market on the order, but TWS may have done something to it to comply with ISLAND requirements. QQQ definitely trades on the NYSE. Based on my experience, I would try to stay away from AMEX if possible. RTharp, That is interesting. Perhaps TWS is a poor platform for executing NYSE trades. That could explain my generally negative experience trading listed stocks. I may have to look into this some more. Thanks for the info.