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Non-Tech : MB TRADING
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To: Rick Faurot who wrote (678)8/1/1998 2:50:00 PM
From: CanynGirl   of 7382
 
Not sure I understand what you are asking but I'll give it a try.

Any MM can sell at the best offer even if his offer is higher. For example, a client calls Goldman and says I want to buy 1000 shares of xyz company right now. Goldman can sell it to him out of his inventory or short it. GSCO then prints the trade. If he shorted it, you will most likely see him appear on the bid to cover at some point. Therefore, trades at the offer can occur while you are sitting there preferencing someone with ARCA or SNET.

My understanding of ARCA is that it's based on 'fuzzy logic' that allows it to determine the most active seller(bidder) and then goes out and preferences him. He then has 30 seconds to respond to your bid. If it's an ECN, it's usually instantaneous. I believe it only tries one, and if that fails it then displays the bid or offer as TNTO. ARCA may or may not preference the ECN that's at the best offer. SelectNet will allow you to be precise in your preferencing.

Another tactic I've found is when you see a gazillion chips show up to bid for a stock. SOES and SNET work better for me in those cases - however it is stock dependent. (# of MM's, volume, etc.) I am curious as to what ARCA does when this happens. I wonder how ARCA determines who to preference for all of them?

Hope this helps a bit.
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