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Strategies & Market Trends : Trading For A Living
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To: Char who wrote (869)7/13/1998 11:35:00 PM
From: Stoctrader  Read Replies (1) of 1729
 
The chart I received from MB Trading says that with ARCA you can Join bid or offer while you can't do this with SOES. If you are joining the bid or offer then why should other MM's get filled before you? I would think that when one joins the bid or offer than they would get the next fill when they got to the top of the queue. Still confused.

Dave,

Just because you join the best bid or offer doesn't mean you'll get filled. Here's why. Let's say a stock is at 10 x 10 1/4 and you enter a higher bid at 10 1/8 through ARCA. Your order would be displayed to the world as TNTO which would change the market to 10 1/8 x 10 1/4. Let's also say that a MM immediately raised his bid to match yours. So now there's two of you at the best bid. If I came along and decided to sell my shares, I could easily bypass you and go direct to the MM via two different routes. First, I could enter a SOES sell order at 10 1/8 and it would execute against the MM because ECN's (such as TNTO, the one ARCA uses) aren't SOES eligible. Second, I could preference the MM on SelectNet which would also bypass you. So even though you are at the best bid on Level II, you could easily get bypassed despite the fact that you got there first.

The new proposed Nasdaq Order Execution system is supposed to eliminate the fact that ECN's aren't eligible for mandatory (SOES) executions like MM's are so that should eliminate the bypass problems.

Regards,

Baron Robertson
Editor and Publisher
Elite Trader
elitetrader.com
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