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Strategies & Market Trends : Trading For A Living -- Ignore unavailable to you. Want to Upgrade?

To: Char who wrote (869)	7/11/1998 5:38:00 PM
From: John Hunt	Respond to of 1729

<< I would think that when one joins the bid or offer then they would get the next fill when they got to the top of the queue. >> David, Nasdaq is not a stock exchange like the NYSE. Rather, it is a network of traders (market makers). There is no central order stacking and no preference for public orders like the NYSE. I am not sure, but I believe the sequence on the Level II screen is by time, not preference. Market Makers can trade amongst themselves and can even cross large orders off Nasdaq or trade in-house and then report the trade. In my experience daytrading (only 3 months), market makers will only trade with you 1) If your price is better than anyone else, generally 1/16 and they can make more money trading with you than with their established relationships. (They would sell out their grandmother for 1/16) 2) They know the market is going to change and it is in their interest to grab / dump as much stock as they can. However, you may still get a fill from an ECN or INCA without the 1/16 differential. Also don't forget that Level II reflects SOES, not Selectnet, and ARCA goes to Selectnet which is usually the same prices, but is out of sight. Not fair, but whoever said life was fair. John PS - I will never forgive my father for not being a market maker < g > (If anyone can correct anything I post, please jump in)

To: Char who wrote (869)	7/13/1998 11:35:00 PM
From: Stoctrader	Read Replies (1) \| Respond to 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