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Resting bids above market or offers below market?

  #1 (permalink)

North Carolina
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
Posts: 644 since Nov 2011

Resting bids above market or offers below market?

I have been think about something. Why cannot traders put in resting bid orders above the market and sell offers below the market? I know how limit/market orders work. However, you could in theory have an off book queue that would only move the orders to active state when the market moved above or below them.

The question is relevant because/in relation to another question. Let's say the market is moving up. I want my bid to obtain top of queue. If I had a server at the exchange how would I program my orders to get the top of book?

If you supported off book (side book) queue then it would mitigate some of the advantage of HFT, I'm thinking. Because, you could possibly code similar strategies without needing special access.

If I try to submit a limit in advance then of course it gets rejected which is the normal behavior. That's normally correct behavior. But, let's say I want to fill the depth as soon as possible, could I just hit the server with messages to insert my orders or is there some more efficient way.

There are two scenarios where we can imagine we have opportunity to get top of book. If we put our orders in well in advance or far off market or if we backfill the orders as they move up or down. We cannot get top of book on anything but the first level because we know that other market makers will have inventory on the next levels.

So the mechanics of the "backfill" or refill are important. If all the market makers have HFT at the exchange and backfill aggressively then we can imagine the orders will arrive at same time.

Last edited by tpredictor; October 27th, 2017 at 08:22 PM.
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