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I'm talking about filling an order from their own inventory.
"Free markets work because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or incentives for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can"
Can you help answer these questions from other members on NexusFi?
I assumed this was because of flash crashes? Imagine during a flash crash when all the stop orders on the book hit at once.
I don't think it is the worst thing in the world to take that risk and order flow off the exchange.
Somewhere I read "if you are trading with a stop you are trading too big" and stopped bothering with stops. That is more in the context of a portfolio of bets though than trading five ES with your entire account.
I don't use stops so my initial reaction was "so what?" but I find it rather disturbing that the exchange sees that the market is so volatile and out of their control that they have to disable GTC and stop orders to prevent stop hunters and people complaining/suing for trades to be broken whenever there's a flash crash.
Why did they get rid of GTC, some investors might have a specific buy level for a stock that they are happy to own at, regardless if it flash crashes past their order or not. It is a pain in the ass not to have GTC, we get clients all the time who want to buy stock at a specific level and that can rest for months, I ain't reentering them every day.
There seems to be a major problem with removing SL's on the exchange side - people will still want to use them because it's one of the fundamentals of capital protection, especially if you aren't sitting at the computer. This means brokers will offer broker-side SL's to satisfy demand and 90% of the people who use it, will still use it.
This inherently opens up a delay which means the fastest brokers will get the better prices and on the more conspiracy side, big retail brokers now have access to mountains of stop data which they can sell/exploit. This isn't forex but it's not hard to imagine funny business if there is a buck to be made.
Does this smell like something HFT's can exploit? If a market starts dipping quick, HFT don't even need to know where the stops are, they can just jump in and front run all the stops as they flood in from the slower brokers. This sounds like it will exacerbate the problem not reduce it.
Or, the stock is fked and it goes to $10 and instead of losing $4 you lose $44. Widen the stop? Bouncing back happens all the time, that's part of the risk. What will happen now is, instead of getting stopped out for a few bucks, the one time we actually do crash and it doesn't bounce, all these retail guys are gonna be stuck with massive losses because they couldn't stop out.
I have read that stop-loss orders triggering can cause mispricing in ETFs where they fall below their NAV.
However, the number of stop orders in the past six months was less than 1% on the NYSE.
So I am not sure what is the real agenda behind this policy.
"We expect our elimination of stop orders will help raise awareness around the potential risks during volatile trading," NYSE spokeswoman said. I am sorry, this is not an explanation, this is like saying "We will eliminate electricity so you understand how essential it is to your life".
Policies like this, and this is only my opinion, are meant to protect someone legally.
This is not a retail friendly policy.
Matt
Optimus Futures
There is a risk of loss in futures trading. Past performance is not indicative of future results.
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
1 800 771 6748 local 561 367 8686 email [email protected]
This is what I do for long term holdings. If I like a stock and it's trading at $30 - I'll put in a GTC at say $28 and hope volatility will sweep me in.
I'm actually providing liquidity by doing that - so it's quite odd that they are going to drop it.
So now I'll have to put the orders in at the start of each day - which means to all intents and purposes - they achieved Nada as my orders will still be there. They have just made me their zero salary employee that has to now do a few mins work for them every day.
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Not odd at all. First, the liquidity you (retail) are providing is meaningless as compared to the liquidity infused daily by the institutions. Second, that is EXACTLY what they want to achieve: They want HFT, funds, etc to be there before you daily. If you place your orders ahead of all of them, you are entitled to be filled first, especially on a GTC that sits there for weeks and or months. Now by forcing you to do so daily, you lose your place in the queue.
I came to the same conclusion on the GTC STOP orders. Just assume you think a break of $24 (using your $30 stock) will lead to a massive decline in that stock. If you place it for weeks ahead of time, same scenario as above, you are entitled to be filled first which works to the detriment of the HFTs, algos, etc.
Maybe I am cynical at times and too much of a skeptic, but the writing is on the wall as far as who the exchange favors.
Like at @PeakGrowth said, he is not going to do so daily. They achieved their goal.
Matt
Optimus Futures
There is a risk of loss in futures trading. Past performance is not indicative of future results.
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
1 800 771 6748 local 561 367 8686 email [email protected]
There is also the issue of thinly traded stocks, where queue position is extremely important, where the difference between being filled on the day (or the next 2 months) can fully depend on who is ahead of you.
If you've being sitting there in first place for 2 months waiting for the stock to come to you, then you should have first place, not the dinky guy that just came along yesterday but clicked faster than you - how is this in any way shape or form fair.
If there is no GTC, it will be a battle of whoever manages to get their order on first in the morning and once again it will come down to the wire, whoever has the faster connection that can put the order on first. For example, if NYSE clears all orders and allows placement of orders at say, 6am (I don't know what the actual time is), the HFT's can get their algo's to send it x milliseconds ahead, down to the last microsecond, and be there first to the microsecond dot. Even if there is broker side GTC, the HFTs will beat everyone.
I'd be interested to see if this coincides with a massive increase in revenue for the HFT firms - I bet it does.
