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Non-Tech : The Island ECN -- Ignore unavailable to you. Want to Upgrade?

To: Paul K who wrote (197)	9/3/1999 9:10:00 PM
From: Paul K	Respond to of 202

Informative ISLD ECN notice... (I assume for broker-clients with direct order entry) <this message sent out via ISLD ECN email list> AUDIENCE -------- Anyone who enters orders into the Island book with a time-in-force value of 99998 (timeout at market close). SUMMARY ------- Island is updating the algorithm used to cancel any open "99998" orders in the system when the primary market closes. We are vastly increasing the speed that the orders are canceled and implementing a more efficient first-in, last-out cancel policy after the close. A side effect of these changes is that any "99998" orders entered after the close will now be immediately canceled. Previously, "99998" orders entered after the primary market had closed were incorrectly left on the book until the end of the Island day. Starting Monday, September 13th, any orders entered with a time-in-force of 99998 after the close of the primary market will be immediately timed-out. WHAT DO I HAVE TO DO? --------------------- If you currently enter "99998" orders after the primary market closes and you want those orders to stay in force until the end of the Island day, you should start using a time-in-force of 99999 for these orders. WHAT DOES THIS MEAN? -------------------- Whenever an order is entered into Island, the party entering the order specifies how long they would like the order to stay on the book before it will automatically be canceled. This value is referred to as the order's "time-in-force". On Island, you specify a time-on-force in seconds when you enter an order into the system. For example, if you specify a time-in-force of 60, your order would automatically time out if not executed within one minute. An order entered with a time-in-force of 3,600 would be automatically canceled if not executed after an hour (one hour = 3,600 seconds). There are three special values for time-in-force in Island, they are: 0 - Immediate-or-cancel. Specifies that you want your order returned immediately if it cannot be executed instantly upon receipt. 99998 - Until Primary market close. Specifies that you want your order to timeout if it's not executed before the closing bell on the primary market on which the stock trades. This is typically 4:00pm eastern, but is occasionally earlier on days before holiday weekends. 99999 - Until End of Island day. Specifies that you do not want your order to timeout at all. It will stay on the book for the entire day until the Island system shuts down for the night, which currently happens at 5:15pm eastern. Previously, Island used a simple approach whereby at the moment of the closing bell, the Island system went through all the open orders and marked any order with a time-of-force of 99998 for cancellation. Once the marking was completed, it then started sequentially canceling the marked orders at a fixed rate of about 20 per second. The cancels were sent in first-in, first-out order, so a "99998" order entered at 9:00am in the morning would get timed-out before a "99998" order entered at 3:59pm. The new algorithm improves this process significantly. It does away with the "stop and mark" practice and instead always keeps a running list of all open "99998" orders in the system. Once the closing bell rings, it begins canceling open "99998" orders starting with the most recently entered one. As long as there are open "99998" orders, it keeps canceling them as fast as it can. So, any "99998" orders entered into the system after the closing bell will be immediately canceled automatically. This actually makes more sense than the old behavior. The only problem is that some people have gotten used to the old (incorrect) behavior. WHY ARE YOU DOING THIS? ----------------------- The new algorithm is much more efficient and will go a long way to reducing the number of "99998" orders that get executed immediately after the closing bell. WHY DIDN'T YOU DO THIS BEFORE? ------------------------------ The old algorithm worked great for the past few years, but as the number of "99998" orders entered into Island surges, it has been showing it's age. On busy days it's not uncommon for there to be more than 100,000 "99998" orders open in the system at market close. The old system was taking several minutes to cancel all these open orders, and occasionally a "99998" order would get executed while it was waiting to be canceled. The new algorithm helps this problem in two ways. First, by canceling orders as quickly as possible, the whole process takes much less time. Second, by canceling newer orders first, the chance of orders getting executed is reduced since, in general, older orders are less likely to be executed than more recent ones. NOTES ----- Not all firms give their customers direct access to the time-in-force parameter. These firms typically will automatically set the time-in-force based on the type of order and individual customer preference. For example, if your firm offers after hours trading and you enter an order eligible for the after-hours session, your firm will probably enter your order with a time-in-force of 99999 (until end of Island day). You can see the time-in-force of any order on the Island book using the HTML version of the Island BookViewer. Simply hit up any stock, then click on any open order. You should see an order detail page that shows, among other things, the time-in-force of the clicked order. This can be very handy to find out how your firm is entering your orders into Island if they do not permit you to specify time-in-force explicitly. We expect that most firms who currently rely on the incorrect 99998 after the close behavior can quickly adapt to this new correct behavior by simply using 99999 when they enter orders after the close and they want those orders to stay open until the Island end of day. If, however, you are an Island subscriber firm and you require more time to implement the new policy, please contact Island Subscriber Services. We can make arrangements to give individual firms more time to make any necessary adjustments. LINKS ----- You can access the HTML version of the Island BookViewer at island.com You can read about how orders are actually entered into Island, and about the various values for time-in-force in the OUCH specification at island.com QUESTIONS --------- If you have any questions or comments you can email us at info@isld.com. Thanks again for using Island.