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Are you saying that there is a special market operating in the NYSE that some traders cannot access? Why would my order not be eligible for being matched, but a

Are you saying that there is a special market operating in the NYSE that some traders cannot access? Why would my order not be eligible for being matched, but a HFT's would? Edit: wow, rate limited after three posts this morning. A new HN low. My response to tptacek below: My dumb order? How can HFT's intercept and redirect my trades to their, appently, captive pool of dumb trades? Sure sounds like multiple markets are operating...and you are even telling me that my orders will be scraped before they can even reach some markets.

tptacek 11y ago
No, that's not what he's saying. But aside from that: the reason orders you place won't be matched on any market at NYSE, let alone a special one, is that HFT market makers will give you a price break to route your dumb order to them so they can collect their tiny spread from your trade without worrying that you're a hedge fund about to steamroll them with a giant block order.
- jsprogrammer 11y ago
  Who is subsidizing the HFT market makers so that they can undercut the rest of the market on their private exchanges?
  - tptacek 11y ago
    This is like a question from a markov generator. I won't try to answer it.
    - jsprogrammer 11y ago
      Some help: >is that HFT market makers will give you a price break to route your dumb order to them You claim a price break on a private exchange. How can they (HFT market makers) deliver a better price than the public exchange? Presumably they cannot have bought it on the public market at the better price, so some party must absorb the loss on the price break. My question can now be translated to: Who absorbs the loss from the price break?
    - nanexllc 11y ago
      When the going gets tough, the questions are dumb? This is the hallmark of lobbyist talk.
mentat 11y ago
Read Dark Pools (http://smile.amazon.com/gp/product/B006OFHLG6/ http://smile.amazon.com/gp/product/B006OFHLG6/) and it will make the setup at least comprehensible.
- jsprogrammer 11y ago
  I think I get the setup and that my characterization is rather accurate.
  - kasey_junk 11y ago
    Well just to clarify a little. There are 2 different concepts that sound sort of similar. 1) A dark pool. This is just another name for an exchange, but one that is not public. I don't know if NYSE runs one, but it wouldn't be surprising. The theory behind these is that they are provided as a service to large institutional investors to trade with each others outside the vagaries of the public markets for lots of reasons (mostly advertised as a way to not impact prices). The reality of these has been mixed at best. You have to opt into using a dark pool. 2) Payment for order flow. In this case your broker (not the exchange) has an agreement with a third party to sell your trades to them so that they can either trade with you directly or route the trade to an exchange. The reason they want to do this is that the aggregate of all the trades they are buying is not price opinionated (as opposed to hedge funds say) so the market maker can make the aggregate difference between all of them. This mechanism is largely how all discount brokers offer cheap or free trading, so it is likely a huge boon to you. A couple of things to note about this, your broker has to disclose it to you, I believe you are still required to get the NBBO price, & I believe you are required to be able to opt out by directing your order to be directly routed. [edit] To clarify your question `jsprogrammer `tptacek is referencing #2 above. The reason the technical oddities & violations at NYSE don't have a huge impact on a retail investor is that unless otherwise stated, they are interacting with a wholesale market maker before their order hits any exchange, in a deal worked out with your broker and governed by legal obligations on both their parts.
    - jsprogrammer 11y ago
Lazare 11y ago
Oh boy, you got this 100% the wrong way around. As a small trader, you get access to special lower prices that a hedge fund can't get. Your broker will be routing your order to a wholesaler who will fill it at lower prices (ie, narrower spreads) than you would get on the open market, because they have a legal obligation to not screw you over. You can request that they route it to anywhere you want, and they are legally obligated to do it if you ask, but you really don't want to do that. Unless you like giving money away of course. (Also, you don't seem to understand basic market mechanics. You use words like "scraped" or "picked up" which are nonsensical in context.) IEX recently suggested that retail investors should request their broker to route their orders to IEX, for which they got criticised very harshly. And rightly so.
- jsprogrammer 11y ago
  As a small trader I don't get paid to provide liquidity. A hedge fund may. I used the word scrape in response to tptacek's response below my above post. If a trader is not aware that what tptacek describes is happening to their orders, then I believe my characterization is accurate.
  - Lazare 11y ago
    You're still not addressing my main point. As a small investor, your order is probably routed to a wholesaler like Citadel, where you will get a better price than you would otherwise get. And you are upset because you incorrectly believed that your order would be routed somewhere else (where, exactly?), where you would get a worse price, which you think would be better because...why? > I believe my characterization is accurate. It's not even slightly accurate; it's literally the opposite of the truth.
- TheNanex 11y ago
  Are you from Citadel? Would you trust Wall Street to give you the best price on anything if there was no way to verify it? There is no way to reasonably know if you are getting the best price (because they can change many times in the same second). You are relying on the internalizer to give you the best of many possible prices. History says: "that's not going to happen"

tptacek 11y ago

No, that's not what he's saying. But aside from that: the reason orders you place won't be matched on any market at NYSE, let alone a special one, is that HFT market makers will give you a price break to route your dumb order to them so they can collect their tiny spread from your trade without worrying that you're a hedge fund about to steamroll them with a giant block order.

jsprogrammer 11y ago
Who is subsidizing the HFT market makers so that they can undercut the rest of the market on their private exchanges?
- tptacek 11y ago
  This is like a question from a markov generator. I won't try to answer it.
  - jsprogrammer 11y ago
    Some help: >is that HFT market makers will give you a price break to route your dumb order to them You claim a price break on a private exchange. How can they (HFT market makers) deliver a better price than the public exchange? Presumably they cannot have bought it on the public market at the better price, so some party must absorb the loss on the price break. My question can now be translated to: Who absorbs the loss from the price break?
  - nanexllc 11y ago
    When the going gets tough, the questions are dumb? This is the hallmark of lobbyist talk.

mentat 11y ago

Read Dark Pools (http://smile.amazon.com/gp/product/B006OFHLG6/ http://smile.amazon.com/gp/product/B006OFHLG6/) and it will make the setup at least comprehensible.

jsprogrammer 11y ago
I think I get the setup and that my characterization is rather accurate.
- kasey_junk 11y ago
  Well just to clarify a little. There are 2 different concepts that sound sort of similar. 1) A dark pool. This is just another name for an exchange, but one that is not public. I don't know if NYSE runs one, but it wouldn't be surprising. The theory behind these is that they are provided as a service to large institutional investors to trade with each others outside the vagaries of the public markets for lots of reasons (mostly advertised as a way to not impact prices). The reality of these has been mixed at best. You have to opt into using a dark pool. 2) Payment for order flow. In this case your broker (not the exchange) has an agreement with a third party to sell your trades to them so that they can either trade with you directly or route the trade to an exchange. The reason they want to do this is that the aggregate of all the trades they are buying is not price opinionated (as opposed to hedge funds say) so the market maker can make the aggregate difference between all of them. This mechanism is largely how all discount brokers offer cheap or free trading, so it is likely a huge boon to you. A couple of things to note about this, your broker has to disclose it to you, I believe you are still required to get the NBBO price, & I believe you are required to be able to opt out by directing your order to be directly routed. [edit] To clarify your question `jsprogrammer `tptacek is referencing #2 above. The reason the technical oddities & violations at NYSE don't have a huge impact on a retail investor is that unless otherwise stated, they are interacting with a wholesale market maker before their order hits any exchange, in a deal worked out with your broker and governed by legal obligations on both their parts.
  - jsprogrammer 11y ago

Lazare 11y ago

Oh boy, you got this 100% the wrong way around. As a small trader, you get access to special lower prices that a hedge fund can't get. Your broker will be routing your order to a wholesaler who will fill it at lower prices (ie, narrower spreads) than you would get on the open market, because they have a legal obligation to not screw you over. You can request that they route it to anywhere you want, and they are legally obligated to do it if you ask, but you really don't want to do that. Unless you like giving money away of course. (Also, you don't seem to understand basic market mechanics. You use words like "scraped" or "picked up" which are nonsensical in context.) IEX recently suggested that retail investors should request their broker to route their orders to IEX, for which they got criticised very harshly. And rightly so.

jsprogrammer 11y ago
As a small trader I don't get paid to provide liquidity. A hedge fund may. I used the word scrape in response to tptacek's response below my above post. If a trader is not aware that what tptacek describes is happening to their orders, then I believe my characterization is accurate.
- Lazare 11y ago
  You're still not addressing my main point. As a small investor, your order is probably routed to a wholesaler like Citadel, where you will get a better price than you would otherwise get. And you are upset because you incorrectly believed that your order would be routed somewhere else (where, exactly?), where you would get a worse price, which you think would be better because...why? > I believe my characterization is accurate. It's not even slightly accurate; it's literally the opposite of the truth.
TheNanex 11y ago
Are you from Citadel? Would you trust Wall Street to give you the best price on anything if there was no way to verify it? There is no way to reasonably know if you are getting the best price (because they can change many times in the same second). You are relying on the internalizer to give you the best of many possible prices. History says: "that's not going to happen"