Trading w/ volatility: excerpt form Yamner with a example of Q!:
Within this already tough environment, market openings, from 9:30 till 9:50 and the last 5 minutes of trading are most difficult. The greatest percentage of volume usually occurs right at the market open. Individual investors, hedge funds as well as other investors may give their brokers or trading firms orders to buy “at the market open”. Thus, the open experiences heavy volume, exaggerated swings to the open. Again, when dealing with the Nasdaq, this is entirely driven by market makers as discussed above.
So while during most other times of the day, from 9:50 through 3:50, when you call Yamner & Co., Inc. you can expect an immediate fill and report, clients must understand that during the opening few minutes, it is simply quite difficult to obtain such an immediate execution. Sometimes they do come. Market orders on liquid stocks can be filled within 5, 10 seconds of the opening. Yet there are times on more illiquid issues that our trades need to work the trade, using whichever or how many ever of our 27 systems, to get you the best price. Quite simply, to want an immediate execution at 9:30:01 is understandable, yet to expect an immediate fill on all stocks, right at the opening, is unrealistic and is something, in the current marketplace that can not be achieved.
Stop orders are particularly difficult to work when it comes to Nasdaq stocks. Stop orders on the Nasdaq, first, are handled by few firms. Yamner & Co. Inc. does handle stops and does a nice job with such client orders. We are one of the only firms in the country that will take two-sided (stop & limit) orders at the same time.
Yet, when you are an investor using a stop and your stock happens to be one of those that is trading wildly on the day, your execution results can and will differ greatly from your stop price.
One particular execution came to mind this week, though, the recent volatility and illiquidity in the Nasdaq seems to make this a more regular occurrence when dealing with one of the Nasdaq's hard and fast movers.
A client had an order to sell QCOM at 166 ½ stop. The stock began trading in that range on Day Y at 11:00:34. Wildly, the stock, already with a significant spread, tanked to 160 by 11:01:46. Quite simply, the stock sank nearly 7 points in 71 seconds. That was probably a near record, which did not help the clients' cause. The client, with at 166 ½ stop was executed at a price several points below the stop price. I know the trade because I worked it personally. Quite simply, the client was disappointed. Yet there was simply nothing more that could have been done. At the time, Instinet was selling several tremendous, 40,000+ shares, and couple with the spread, no market maker wanted to take in stock. Who could blame them? With the stock at 166 one minute and 160 less than 70 seconds later, would you take in stock? Of course not.
The client, in our discussion, wondered why it took a minute, why it wasn't “auto-filled”. Quite simply, all market makers when something starts acting like that turn off any auto-fill systems. That being know, in hunting around other systems and technologies, given that no one in their right mind wanted to own stock during that down draft, to get a trade off in 71 seconds was, in my opinion, outperforming what the client might have gotten anywhere else.
Situations like this occur frequently in fast moving, volatile Nasdaq stocks. And while the executions are not up to a perceived “Yamner” ideal, they are, in my opinion, excellent executions, outperforming what someone may have received elsewhere. |
