One area that we could try to enhance on this thread is the use of the proper lingo. There is certain lingo, way of phrases sentences that is universal throughout the industry, such that if you learn it here, you can take it anywhere and any trader/firm will know EXACTLY what you mean.....
If anyone wants to know how you phrase something, ask me..here are a few
1. when giving a quote, dont use the whole numbers with the offer unless they are different than the bid...ie...stock is 10 1/8 x 1/4.
2. if you are giving an order to the firm.....
"bid 1/8 for 300 arts" or 'buy 300 arts at 1/8"...
3. what I would say to a market maker if i were to do it via phone....
'A-R-T-S alpha roger tango sam, i've got a 1/8 bid for 300 small shares.'
small shares - keeps it from being considered 300,000
4. If I am working with a market maker ON the offer at 1/8 (lets assume its offered at 1/8), add to above,
' 3 x 1, your offering ' tells the trader on phone its 3 market m's bidding offered by one, they are offering...some desk traders might not even look up l2 if you have a good relationship.
'3 x 2, offered away' - tells market make his firm is NOT on the offer and we want them to be compeitive.
Now , before anyone gets rough and tumbly about phone orders, please again note most all orders in the industry are done electroncially, soes, snet, etc., but I am simply using phone orders since they offer a learning curve.
You can also check out the Trading Desk Soundbytes at yamner.com Yamner University then soundbytes page.
Mike B...here is an answer to your post....see my comments mixed in...
", I placed an order on Datek to buy 300 shares of Media Arts Group (ARTS). ARTS was 20 by 20 3/8."
-bid 20 offered at 3/8 or 20 x3/8.
"this out of the market order moved the bid to " - its called a limit order and its actually within the inside market....
with stock 20 to 3/8, if you bid 20 1/8 for 300 shares, you are improving the sidemarket....buying at 19 is considered away from the market...selling at 20 1/2 is away..
"20 1/8 by 20 3/8." - just use 1/8 x 3/8..
Bidding 20 1/8 for 300 ARTS, it should have been 'your bid'. It might not have been but only a level 2 screen at the time would have seen whether ISLD 'went to the bid' at 20 1/8 for 300 shares....some market maker might have beat them to it and you would have been second in line. Thus SOES orders and other market participants might have gone to the market maker (isld is not a mm) with a larger bid. Nonetheless, if ISLD was infact on the bid representing your 300 share bid, and prints occured at 1/8, it could have been other market makers TAKING IN STOCK on client orders.
ie..if the inside market is 1/8 x 3/8, although only bid 1/8 for 300 shares (your bid), then all the other firms out there can not take in stock on market sell orders at 20, they must take it at 1/8. So it could be firms/mm's taking in stock at 1/8 from internal client orders, 'in-house orders', for an inhouse cross, or it could be a market maker being compeititve...
why would a mm being competitive, willing to pay an 1/8 for stock when in fact they arent bidding? they want the flow. they want orders flowing in on the bid and the offer. If they can fill market buy orders from client A at 3/8 and take in stock at 1/8, they are happy, they spread 3/8...sure they want it at 20 but your bid on isld keeps them from taking in stock at 20.
For instance, there are firms that agree to be competitive with inside market upto a certain limit. Thus lets assume this stock was SOES eligible and there was only a bid for 300 shares, and lets assume it was a SOES eligible firm, not ISLD which is not soes eligivle, certain firms will do upto 2, 3 k at that price, even if they are not bidding. In essence, you can do BETTER than soes since no soes limitations, size and time, etc.
This is how order flow arises..and then of course, order flow compensation, which has its place in the industry, as long as the clients' best interests are first and foremost in the traders' mind.
In the end, if it was your bid and you didnt get filled, it must have been trades done 'away' from ISLD, a market maker taking in clients stock at 1/8 or a market maker being competitive with the inside market (i think those two are the same but I kept them apart)
Regards,
Steve@yamner.com |
