More e-questions about e-Quotes

By: Ray Pellecchia

File Under: NYSE, NYSE

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Student Jan Steenbergen (who must be attending UH, University of the Hybrid), asks some additional questions following up his earlier Q&A.

First, thanks for your answers. But what happened with the reserve portion of a reserve e-Quote when the BBO is changed? I suppose it’s channelled?

Another question is keeping in my mind: If I quote outside the BBO, I would have the opportunity of price improvement during a sweep. This opportunity isn't there when I’m quoting at the BBO. Why are customers who quoted at the BBO penalised? I suppose I forget something here.

Thanks a lot!

Jan -- Your additional questions are annotated below with answers.

But what happened with the reserve portion of a reserve e-Quote when the BBO is changed? I suppose it’s channelled? The reserve is treated simply as an equote away from the quote. e-Quotes away from the quote are not published so there is no need to differentiate between published and reserve.

Another question is keeping in my mind: If I quote outside the BBO, There is no such concept as quoting within the same market center outside the quote; we have a limit-order book that is published called OpenBook, but that is not really quoting. I would have the opportunity of price improvement during a sweep. Not any more; electronic sweeps have been changed to execute at each price point. If there is a manual sweep on the floor as a result of a negotiated trade, then you may be price improved.

This opportunity isn't there when I’m quoting at the BBO. Why are customers who quoted at the BBO penalised? Federal security laws regard the inside quote as a firm bid or offer to buy or sell stock, and those prices must be honored by law.

Thanks again for your questions.