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Strategies & Market Trends : From the Trading Desk -- Ignore unavailable to you. Want to Upgrade?

To: Brendan W who wrote (3416)	7/24/1998 12:05:00 AM
From: Steven Bowen	Read Replies (1) \| Respond to of 4969

Brendon, "As you know, the MMs are required to display your order or fill you in x minutes, and if they don't, and there was an execution at your price, you're due a fill." Do you know this to be true??? Steve? Using my earlier example, quote at 40 by 40 1/2, enter an order to buy at 40 1/8, do any subsequent trades at 40 1/8 neccessarily have to fill me? If the bid updates to 40 1/8, do any trades at 40 1/8 neccessarily have to fill me? I'm under the impression that they don't neccessarily HAVE to fill me, but maybe should. My impression was once my bid is entered at 40 1/8, anyone is able to fill at 40 1/8, ie there is no first come, first served type of fills. I could be the first one bidding 40 1/8, but once I do, others could take all the shares available there, then move the bid up and leave me out. At least that is what happens all the time. What I really hate is when in the above example I enter an odd order like buy 800 at 40 3/16. The bid updates to 40 3/16, showing a size of 800. The next trade happens to be 800 at 40 3/16, maybe followed by a few more trades, and then the quote updates to 40 1/2 by 40 3/4, and I get no fill. Again, happens frequently. I saw the same type of thing happen to a friend the other day with an option trade. I don't recall the exact details, but he entered a buy order to buy between the spread, something like 25 contracts at 2 1/8 when the quote was 2 by 2 1/4. At the time the volume was zero. He watched the quote and it eventually showed 25 contracts traded at his price. The stock immediately started moving up, and the MM didn't give him the contracts. Again, because he wasn't entitled to a fill, since the ask never traded down to his price. He bitched to his broker and they eventually gave him the contracts, but they sure weren't going to without his broker complaining. It is really unsettling to think how much this happens every day to unsuspecting investors out there who don't have a clue. I know this is one of Steve's main messages, how much those $9.95 trades are really costing people, but I think many still don't get the grasp on how bad they're really able to get screwed without them even knowing it. I used to think I protected myself by always using limit orders, but now I'm seeing myself getting burned just as bad as if I were using market orders.