Yeah, machine-held can either be "trading-workstation held" (Cybertrader has this feature), or "broker-held" (where it's held in the brokerage's order-processing computer systems -- e.g., Schwab's Nasdaq stops). Keep in mind, there is no centralized "book" on the Nasdaq, so there is no such thing as a stop order on the Nasdaq; they are all synthetic.
In either a a broker-held stop or workstation-held stop, an advantage is that the order doesn't go onto the "book" where the market makers, other traders, and/or specialist can see it. The computer holding the stop order is simply monitoring the Bid, Ask, or Last tick prices on the tape, and once the Stop order is triggered, it is converted into a Market order which is filled (through various types of order routing, depending upon the brokerage/clearning firm/trading system). Sometimes a problem there is limited routing, like with Schwab where you will not get exposure to the best liquidity (especially, it seems, in a fast market!).
ECN-held stops are similar (e.g. ARCA stops) to broker-held stops, except they ARE visible to other traders (on the order book). Not as much potential for "manipulation" there, as on the exchange-held (e.g. NYSE) stops since ECN's implement an automated order book. But the potential for manipulation is always there of course, whenever your stop order is exposed on the book.
Steve |
