[The question being discussed is why (or indeed if) Island cancels the balance of an order which hits/lifts the inside bid/offer and reports "would lock/cross," even when it would NOT lock cross because the previous bid/offer was alone at the inside. It is stipulated that the order is a day order during normal market hours, not subscriber-only, and not invisible.]
Using MB Trading's version of RTIII, the IOC option appears under "Expiration" (Day, Day+, GTC, and IOC).
Thanks for reminding me of the RealTick III expiration choices; since I too always use Day, I had forgotten about the interface for the alternatives.
Someone on the trading desk at MB Trading and also someone at Island told me on Friday that the balance shouldn't cancel in the instances at issue unless the order was specified by the user to be IOC; instead, the balance should become the new best offer/bid.
I now believe that if there is some setting that is causing these partial cancellations coming back with "would lock/cross" explanations, it is applied by Island to all orders from a subscriber (in our case, Terra Nova, of which MB Trading is a branch). I have examined Island's software interface to the subscriber, and the only relevant specification that comes in with the order is the time interval until the order expires. For IOC, this is set to zero; for day or day+, to special codes denoting those expirations.
In my experience the cancellations of the partials are always explained with "would lock/cross" messages; I see three possible reasons for display of those messages:
(1) Those who, like me, think that the "would lock/cross" messages are untrue in the cases under discussion are wrong: the lock/cross messages have been correct and we've been fooled by coincidences of timing to think that the Island bid/offer that we hit/lift was alone at the inside at time of execution, when in fact it was not alone;
(2) The messages are untrue -- there would in fact be no lock/cross -- and the cancellation of the partial balance is due to a deficiency in the Island software that prevents it from accommodating this "special" case in which no lock/cross would result because at time of execution the book is alone at the inside;
(3) Island is not sending a "would lock/cross" message with the cancellation, but a bug in Terra Nova's order server software or in RealTick III is causing an incorrect message to be displayed. In this case the real reason for the cancellation is as yet unknown.
I will continue to pursue this question until I better understand what's really happening, because it affects my bottom line. |
