Some articles are making a big deal out of the do not ship's. Order types essentially identical to DNS already exist via such market centers as Arca and PHLX. Traders were long able to send orders to a single venue and request they not be routed elsewhere.

by Vlad Khandros on March 13, 2007 4:37 PM

I should have noted: the new order type is pending with, but has not been approved by, the SEC. Thanks to my Hybrid-Building Colleague for pointing this out.

by Ray Pellecchia on March 13, 2007 4:43 PM

Ray,

Can you tell your "Hybrid Building Colleague" to start over?

Seriously.

Would one of these colleagues just look at a graph of how stocks traded BEFORE the system and now a graph of how stocks trade NOW and HONESTLY say there has been an improvement???

Honestly. Stocks are trading crazy. We've been saying this ever since the hybrid was fully implemented. The system is broken. When is it going to be fixed? Can you guys at least ADMIT that stocks are trading all wacked? Can you ADDRESS this?
Can someone there explain why they are trading all crazy if only 3% of the orders you receive are market orders? Because while you claim that 97% of all orders received are limit orders, the way stocks are trading tells a different story.

Thanks Ray. I feel we keep bringing up the same stuff but nothing is getting better. We're just talking about it.

When can we really address it and stop making excuses for this system? Just look at stocks and how they trade now. With no disrespect intended, have a trader explain to you what's up with the price action. It's easy to understand when you look at a couple of graphs what is wrong with the system.

Thanks, Chris

by Chris on March 13, 2007 9:28 PM

We used to have people complaining about specialists holding up their orders, trading ahead of them,pennying,etc. Now we have complaints about too much volatility due to the automatic executions. The SEC believes that investors want speed of execution and low costs.This isn't going away anytime soon. Stop whining and deal with it.

by jimmy on March 14, 2007 8:46 AM

The SEC is wrong. Hedgies want speed of execution. The average trader would prefer to get price improvement and liquidity (the specialist actually taking a position when needed on our trades) and "wait" an agonising 3 to 10 seconds to get our reports. It's sad that hedgies have hijacked the NYSE and that is who they seem to be listening to. Now I get 8 executions on 1000 share market orders at different prices in a nano second vs. getting 1 execution in a few seconds. Yes I long for the old system and I think those of us who have been around all these years have every right to complain considering all the business we have given the NYSE over the years. The blurring of the market places between NASDAQ and NYSE and how their models work is not good for traders that don't use algo's and quite frankly it's bad for the mom and pop investor as well. The disimprovement that customers recieve adds to the cost of execution. On a side note, it would actually be nice to be able to speak to a human being at DOT once in awhile, customer service has gone down too thanks to the purges of the hybrid mkt. Ray, thanks for the great blog...It's informative and also allows us to discuss the hybrid.

Steve.

by steve on March 14, 2007 9:29 AM

Jimmy,

I'm just looking for some answers on HOW to deal with it.

I've traded with market orders on this exchange for 8 years and done well. I haven't increased my loss limits or changed my trading style but I can't make a fraction of what I used to make since the hybrid has been rolled out.

I'm not interested in getting into a flame war about whining. I really just want some help. If you have some answers, help a brother out.

-Chris

by Chris on March 14, 2007 10:46 AM

i definately would like to see more price improvement. 90% of orders are limits but it seems when i am limiting anywhere i never get filled. their is always 100 shares that cuts in front of the limit. anytime i try to limit via ecn's, about every ecn out there will join my limit and when i cancel they will too.

by brian on March 14, 2007 11:31 AM

I was also wondering how stocks have big price swings on 100 share prints if 97% of the orders the NYSE recieves are limit orders. This doesnt seem correct. It would make more sense if most of the orders were actually market orders instead. The momentum has swung to far towards speed and in the process has really destroyed market quality which in the past was always a trademark of the NYSE. I have always been a loyal customer of the NYSE and i hope they increase price improvement & matching as well as fix some of the things talked about in this blog. I think the Hybrid could serve the public much better then it does now. Thanks.

by tony dey on March 14, 2007 8:07 PM

tony, and fellow hybrid crtics,

I Couldnt agree more with what WE have all been saying. The NYSE for EVERY trader i know has become and absolute joke, no price improvement, 0 consistentency, and forget about tape reading. I have posted on this blog a few times in the past and share the same opinion of many the hybrids' critics. The bottom line: My patience is gone. I do not believe the important people pay any attention to our criticisms, and in fact, spend more time talking about the Beatles, Yardbirds, or any other civic leader, we as traders could really care less about. Top of the market was supposed to help but in reality, has not. Stocks, as tony says, will move 60-70 cents on just a few prints and shares. And as a result, i have moved just about 3/4s of my trading operation to Nsdq. Good luck NYSE, we had a nice run.

by jt on March 15, 2007 11:43 AM

Some counter-thoughts for you to consider: 1. When you small order is "price improved" it's not out of the goodness of someone's heart. It's because there's so much supply at the level you were willing to pay that someone (in the old days mostly the spec) was willing to sell it cheaper in order to get THEIR execution off - not help you...and likely they made a better sale than you made a pruchase - even with your "improvement". The scheme of "pennying" big books (see LU) was done under the guise of helping the customer. That's the reason it was outlawed in Hybrid.

2. The real issue that should be addressed is the NYSE's inability to handle the data. Even today (the 15th) the NYSE routinely falls behind in their prints and the ripple effect is not small. Charts are screwed up, etc. Additonally, many of these very late trades are not being reported with the proper codes, leaving the (false I think) impression that they are trade throughs. Yes, NYSE stocks are more volatile and that is surely because of Hybrid. If you individual trader/investors really knew what used to happen with your flow (recall the spec used to have an enormous amount of time to "handle" you ticket in the old system) you'd be livid. For you that used to be pure market order traders - you scare me. if you want to be that aggressive and put your hands at whatever the screen is currently telling you go right ahead but why not just use a limit with some room - seems alot smarter.

by mike on March 15, 2007 1:56 PM

JT- I understand how you feel but i depend on the NYSE to do my business and the Hybrid has really hurt traders in general. I have seen many traders go by the wayside and the only people that are really doing well are Black Box guys. IMO, Black box's along with the super-montage destroyed Nasdaq and seem to be having the same negative effect on the Hybrid. Mike- I have been trading for over 15 years all on the NYSE and the market worked much better when the specialists were handleing the orders. Stocks had better support and the market quality was far superior then what we have now. I think the way the stocks traded with the recent 400 point decline proved that fact. There was no doubt that the old system had some flaws but it worked better then the Hybrid does now. What we need is a true "Hybrid" with more human intervention with the added speed of the current Hybrid. Then the NYSE would regain the confidence of the customers and once again be the premier exchange in the world. Thanks Ray.

by tony dey on March 15, 2007 5:06 PM

Ray,

In regards to the original topic of the post...

Lets take this scenario for example...

I want to buy 3k shares of ABC at .75. On the offer at .75, there is 1k NYSE, 5k ARCA, and 5k ISLD.

Is there anyway now that if I send the order to NYSE, that I will not have to pay the routing fee to get my 3k shares?

Right now my firm is telling me that I have to route away and pay 2.50 per 1000 instead of the .275 cents for the other shares that complete my 3k lot.

Is the DNS order going to prevent this scenario ...or is there a way now that I can avoid the route away? It seems unfair that I get almost a 9x price increase for stock from a vendor that you are forcing me to buy from.

Please clarify...

Thanks,

David

by David on March 15, 2007 10:03 PM

Mike's coments about the NYSE's inability to hande the data cannot be underestimated, however it seems par for the course.

by jeff on March 16, 2007 10:00 AM

How do DNS orders differ from Reg NMS IOC orders?

by Al on March 16, 2007 2:09 PM

Ray, I would also like to know if the "do not ship" order would solve the problem david posted. Thanks.

by tony dey on March 16, 2007 7:17 PM

Al --

There are three main differences between Reg. NMS Immediate Or Cancel orders and Do Not Ship orders:

1) NMS IOC orders continue to execute up to the point when you would need to ship, and the remaining balance is automatically cancelled; DNS orders will be placed on the book as a limit order and automically cancelled when another market publishes a better price.

2) NMS IOCs are not included in the quote; DNS orders will be able to be included.

3)Reg. NMS IOCs are automatically cancelled in a trading halt; DNS will be able to participate in a re-opening trade.

Here's a neat one-page summary of Reg. NMS IOCs, NYSE IOCs, Intermarket Sweep Orders and DNS orders. As a reminder, DNS orders are pending the SEC's review, and we'll let you know when they are approved and implemented.

Thanks for writing, Al!

by Ray Pellecchia on March 26, 2007 9:09 AM