LOG of #MBTRading SelectNet Discussion
<RHD> Slide for today is mbtrading.com
<RHD> bring it up on a browser so you can follow along
<RHD> This chat will be placed on the website for review
<RHD> at a later date if you need to refer back
<RHD> SelectNet or SN, is an electronic system of trading primarily used for trades between market makers, MM's. SN
offers the trader added flexibility when executing an order on the NASDAQ exchange.
<RHD> The main areas our discussion will involve are Speed, Price Improvement and System Restrictions.
<RHD> As previously stated SN is primarily a MM to MM execution system. Therefore it is important to note that your
bid/offers like SOES are NOT reflected on the LVLII system, only ECN's or MM's themselves may place bids/offers on the
LVLII system.
<RHD> Instead orders are displayed on MM's terminals only.
<RHD> SN is a negotiable system. Negotiable meaning that a MM may or may not execute your order (refers to backing
away) unless it is at his advertised price and he actually sees it appear on his screen.
<RHD> The structure of SN is such that traders will bid/offer stock to a MM. This price that one bids/offers a stock is not
limited to just the bid/ask (inside market) but instead a bid for example may be at the current bid to above the current offer
you can not go below the best like ARCA
<RHD> This is important as it lends itself to our discussion of the ease of moving larger blocks of stock in and around the
current inside market. Once the order is "live" and NON-Preferenced all MM's will see this order on their trading stations.
<RHD> This is known as a BROADCAST. The MM will then execute the order in many cases manually (i.e. he presses a
button) to complete the transaction with the trader.
<RHD> Orders may also be placed on PREFERENCE. Prefing allows a trader to isolate 1 MM to trade with.
<RHD> This function allows the trader to select a particular MM which has shown to be an active trader in a particular issue.
<RHD> The benefit to the trader is the ability to get the immediate attention of the MM which will often result in a faster
execution of the trader's order.
<RHD> The benefit to the MM is that unlike BROADCAST, PREF prevents any other MM besides the one being PREF to see
your desire to execute an order.
<RHD> The benefit to the MM is that unlike BROADCAST, PREF prevents any other MM besides the one being PREF to see
your desire to execute an order.
<RHD> oops
<RHD> Much like a poker game, the fewer people that know your hand the better you can bluff or prevent others from folding
when you have a winning hand.
<RHD> To further illustrate the poker concept, if you want to buy 10K of a thinly traded stock and SOES is not an option then
a BROADCAST will inform all MM's of your pending purchase.
<RHD> Not a very intelligent method of trading in some cases. Conversely with PREF to a large house such as MLCO,
PWJC, GSCO, a trade has a greater possibility of being executed without the market "moving away".
<RHD> Size restrictions on SOES are not present when using SN.
<RHD> TIER limits only apply to SOES and therefore the use of SN can allow a trader to take or liquidate larger positions
without being subjected to TIER limits, 5 min. Rule or a fast moving market which would destroy the chance of a decent fill.
<RHD> A good rule to remember is that MM's are often filling orders for clients. If they have an order to buy 10k shares of
ABCD they to are limited by the TIER limit of a stock on SOES.
<RHD> The TIER limit can also put the MM in a position of paying up for a stock if only SOES sellers were available.
<RHD> On the other hand the use of SN allows both the trader or MM and the buying MM the ability to complete a
transaction in its entirety with one fill. This of course regardless of the direction of the stock benefits both parties of the
transaction.
<RHD> Let's take a look at a slide for an example NVLS.
<RHD> mbtrading.com
<RHD> (assuming a 1000 TIER)
<RHD> With FBCO and TNTO bidding 1300 at 1/4 and SBSH, GSCO and BTRD offering 2100 at 7/16 the use of SN may
allow us the chance for a price improvement as well as a way to buy 5,000 shares.
<RHD> Where SOES would be required to BUY at 7/16 up to 1000, SN will allow us to do the following.
<RHD> 1.
<RHD> . 1. BROADCAST a buy of 5k shares at 47 ¬ chance of execution low
<RHD> .2. BROADCAST a buy of 5k shares at any price greater than 47 1/4 up to 47 7/16 will give us a higher chance of
getting filled. The closer we get to 47 7/16 the better the chance.
<RHD> .3. BROADCAST a buy of 5k shares at 47 7/16 to 1/2 (outside the market) this is comparable to a SN market order.
Should SBSH, GSCO be on a refresh we would most likely have a high chance of receiving a fill at or above 7/16 with TSCO,
NEED etc...
<RHD> Keep in mind that FBCO is on the bid. Depending on whether they are making markets or working an order, the trader
may consider:
<RHD> .4. PREFERENCE. By PREF. to SBSH, GSCO or even TSCO the trader may get a complete fill quicker than SOES.
Remember that SOES allows the MM 15 seconds to refresh. A PREF.
<RHD> The more shares you want the higher you generally will have to pay. The more you show you want the higher the
chance that the market will move away from you.
<RHD> Better to accumulate 25k shares 5 at a time in a slow market then attempt to get 25k at once.
<RHD> MM are not stupid just very good at what they do, if they know you want to buy that much you must really want the
stock or cover your short, either way they will do what ever they can to make that difficult on you.
<RHD> Two, additional benefits of SN are the ability of the trader to place an AON order. ALL or NONE, allows the trader to
demand that a MM take all that is being bid or offered.
<RHD> Keep in mind though that if the MM does not have the inventory he may not execute. On the other hand the MM may
chose to execute fully and begin going short on the stock. Another benefit of SN is that it can be used from 9:00 AM to 5:15
PM.
<RHD> To summarize,
<RHD> 1. SN allows for price improvements by not restricting the price that the order is entered at
<RHD> .1. SN allows for price improvements by not restricting the price that the order is entered at
<RHD> .2. SN is faster than a phone order but usually slower than SOES or an ECN
<RHD> .3. SN can execute any number of shares up to 10,000
<RHD> .4. SN allows for the PREFERENCING of a MM
<RHD> .5. SN allows for an AON order
<RHD> .6. SN does not display on the LVLII screen
<RHD> .7. SN does NOT obligate the MM at any price but the one showing.
<RHD> .8. SN BROADCAST is seen by all MM's
<RHD> .9. SN will return the MM which your trade was executed with.
<RHD> .10. SN can be used pre and post market
<RHD> Thank you all for allowing me to present you some concepts on the use of SelectNet for the NASDAQ.
<RHD> as always go easy on me for questions
<Younglead> HI, newby here, been watching for about a week. It's great.
<RHD> questions will begin with @MBT down to Jeff-B
<RHD> none?
<RHD> okay Jeff-B down to _mark?
<dbcooper> Where's the drinks?
<RHD> ahh we got your drinks
<_mark> rhd: other chances to buy premarket than sn ?
<RHD> no questions, you guys letting me off easy?
<dbcooper> LOL !
<RHD> _mark, you can often use ARCA for premarket
<tader> when is SN better than an SOES or ECN order?
<sunnyyyyy> premarket executions RHD
<Maxc> How do you actually order SN. The Select Net Button?
<RHD> tader, lets wait 2 more discussion for "Putting it all together"
<Maxc> How do you selec MM?
<sunnyyyyy> SN only?
<RHD> I like ARCA premarket
<RHD> but I may sometime use SN
<_mark> tried sn w/ pref in premarket never get filled, even when my bid was at the ask of the mm
<tader> ok, but what are the other 2 discussions about?
<RHD> _mark, for how long?
<sunnyyyyy> didn't know we could do arca premarket
<RHD> remember he can stay for almost 30 seconds
<_mark> well just a week now
<RHD> 30 min before and 30 min after
<RHD> .30 min before and 30 min after
<stpete> RHD, Is sn the same as Instinet?
<tader> VC22, yes
<sunnyyyyy> what about SN?
<tader> stpete, no, Instinet is INCA
<RHD> SN is not Instanet or INCA two different services
<RHD> _mark, no idea lets discuss this later so I can analyze with you
<_mark> just tried some for experience. but never got filled.
<sunnyyyyy> SN is available 0 ore and aft?
<RHD> sunnyy, yep
<stpete> What are the trading times on instnet RHD?
<_mark> someone said the mm's just sitting on the ask but have no shares, is that possible?
<RHD> INCA for MBT is 40 min before and 40 min after
<italiano> Hello?
<sunnyyyyy> auestion
<RHD> _mark, no but this is a form of backing away
<RHD> the mm would say something like...
<sunnyyyyy> how do we do INCA
<RHD> " funny, I was not looking at my terminal" "I didnt see him" etc...
<_mark> when is it better to take arca, when sn in premarket ?
<sunnyyyyy> is there a special button?
<RHD> there is a division of the SEC which investigates issues like thes
<RHD> no, We do INCA for you when you call in
<_mark> thats what i thought, rhd
<sunnyyyyy> ok
<_mark> know that from our market. they have often fake bids/asks
<sunnyyyyy> now
*** sdflkj is now known as scotto
<sunnyyyyy> what about partials on SN
<stpete> I thought INCA traded 24 hrs. if someone was there, no?
<Ninja1> When you get us in INCA do you have to get us out
<Maxc> I've seen trades until 4:54 EST . Is that Instinet?
<RHD> sunnyy, Sn allows AON
2sdflkj: no such nick
<sunnyyyyy> when we get a partial on SN
<RHD> yes that is INCA
<RHD> yes you could get a partial but chances a lot less
<sunnyyyyy> do we have to reorder to get the remainder?
<RHD> sunny, yep, always
<tader> RHD, which of the execution options can we do with your software without calling in, ECNs, SelectNET, ARCA,
Island?
<tradinjr> i came here from dto
2*: no such nick
<sunnyyyyy> if we do AON
<RHD> tader, all but access the INCA book
<iels> Is there a fee for SN?
<RHD> no extra fee foe SN
<sunnyyyyy> then it will not fill unless all are available and we could be more likely to miss the trade?
<tader> Which of the exectution options have an extra fee, e.g. $0.01/share extra?
<sunnyyyyy> re SN
<RHD> sunny, yes
<Maxc> Do Change Orders Work or is it better to Cancel and reorder?
<RHD> tader just INCA and BTRD
<tader> better to cancel and reorder
<RHD> NO NEVER CHANGE ORDER ALWAYS CANCEL
<systex> RHD, if we preference with SN to sell to a mm at 8 and there is another mm at a 7 ask, I assume that only the 8
ask sees our order?
<RHD> ****Read the Rules of the Trade
<RHD> systex, correct
<sunnyyyyy> RHD if we get a partial on SN.....is the order cancelled or will it sit til it is filled?
<RHD> it will stay live regarless of fill size
<sunnyyyyy> ok
<stpete> RHD, INCA can trade 24 hrs. theoretically, right?
<sunnyyyyy> then
<RHD> in theory yes
<sunnyyyyy> SN is very much like ARCA
<sunnyyyyy> where as
<sunnyyyyy> with soes
<sunnyyyyy> a partial is dead when it moves off the price
<RHD> sunny, correct
<sunnyyyyy> ok
<tader> RHD, if a MM rejects your SN order, does it stay live until you cancel it or does it cancel automatically after some
time?
<RHD> first a MM can not reject a SN order
<RHD> it will stay live on a Broadcast for min
<RHD> and live on a PREF for 0
<tader> thanks
<sunnyyyyy> interesting RHD
<Humorous> For newbies, is this a progressive learning experience? i.e. have I already missed too much to know what's
going on?
<lino> Can we trade Selectnet and get filled after hours?
<tader> yes
<stpete> Isee trades until 17:30, how are they done?
<sunnyyyyy> will it automatically cancel?
<glenned> if you pref a MM with a buy at the inside offer, does he have to fill or leave that price within 15 secs?
<RHD> After market is mostly done via INCA
<RHD> glen, he has to move or fill
<MrBuzz> 30 seconds is quote a long time... especially when the MM hides it...
<RHD> yes it will KILL
<RHD> stpete you cant so why bother?
<stpete> Is that second part of the aftermkt just for institutions?
<lino> How do we cancel the unexecutd portion of an order?
<sunnyyyyy> click in the order
<RHD> except us
<RHD> after market is cool to say you can do but lets face it. If its been 10 minutes or longer and you carried a position it
most most
<Maxc> So those late orders are filled the next day?
<RHD> likely due to a conscious decesion
<tader> RHD, can you give us a preview of the next 2 discussions?
<^^NeSi^^> RHD, some day i will open an account with you
<sunnyyyyy> click on the live order to cancell
<systex> RHD, would it be fair to say that in most cases where we are selling 1000 shares or less that a SN broadcast would
be better than setting a preference
<RHD> zMax, no all MBT order are day orders
<sunnyyyyy> Lino
<RHD> systex, depends
<RHD> next two discussions....
<RHD> next is ARCA
<RHD> and then we will have a couple on putting all together
<RHD> and coming up with trading strategies
<RHD> using what we have learned
<glenned> what techniques can you suggest to increase likelyhood of gettting a fill pre-market. My limited attempts hafe met
with failure to get fills.
<RHD> glen, call us so we use INCA, try ARCA, try SN
<lino> I understand Sunyy
<iels> rhd, you said above that mm must move or fill in response to question by glenned. could you elaborate?
<RHD> yep
<sunnyyyyy> on a pref
<RHD> iels, if you pref a mm at his price he must fill or move if on a refresh
<MrBuzz> RHD, u mentioned above that for a bid, one cannot bid below the current bid... why is that?
<RHD> if on the inside
<Zap> If there are lots of TNTO orders waiting to get filled, will my SN preference usually beat them?
<^^NeSi^^> LOL
<^^NeSi^^> i know.. i know..
<RHD> Zap, ahhhh a hush falls over the crowd
<RHD> that is an excellent question
<^^NeSi^^> some day i will be a money making machine.. LOL
<RHD> if you see all the Chippies linning up
<RHD> guess what....
<RHD> YOU AINT GUNNA GET FILLED ON ARCA
<RHD> so this is why our next discussions are so important
<sunnyyyyy> RHD
<stpete> Will ask you in private what "session 2" means.
<RHD> you better think of using SN PREF to a MM or SOES or SOES MKT
<sunnyyyyy> does the mm have to move the price to not fill within the 0 seconds?
<RHD> sunny, yes but rare it happens
<RHD> usually they are on Autoexecute
<WSRaider> RHD Can orders be represented in the Instinet in the after market?
<RHD> WS, yes we can place an INCA order for you.
<sunnyyyyy> Chippies??
<RHD> ARCHIP's
<sunnyyyyy> what is a Chippies?
<RHD> ok, beer time?
<Jeff-B> So for a bail - a line of "chippies" for the same bail SN w/pref would be a good call?
<RHD> yes or SOES
<RHD> SOES MKT
<tader> to place an INCA order, what telephone number do we call?
<RHD> stpete, yes
<Zap> If a MM offers an inside price, no activity, and I SN pref him, shouldn't I always get filled?
<RHD> tader, just call the 888 number
<sunnyyyyy> on SN
<sunnyyyyy> can we place an order between the spread or at the bid?
<sunnyyyyy> on SN
<RHD> sunny, yes, I covered that
<RHD> when buying you can be at or above the bid
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