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NYSE eliminating stop orders
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NYSE eliminating stop orders

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NYSE eliminating stop orders

NYSE to eliminate stop orders from February | Reuters


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Investors will not be able to make "stop orders" and "good till cancelled orders" on the New York Stock Exchange and NYSE MKT from Feb. 26, the exchange said, as it looks to reduce risks during choppy trading.

A "good till cancelled order" is valid until an investor cancels it or the trade is executed, while a "stop order" allows an investor to buy or sell a stock when it exceeds a particular price.

On Aug. 24, people had standing "stop orders" that they thought would protect them, but the shares crashed through the "stop orders" and investors were automatically sold out of positions at prices well below where their "stop order" stood.

All existing "good till cancelled orders" and "stop orders" residing on the NYSE book will be canceled, NYSE said on Monday.

"We expect our elimination of stop orders will help raise awareness around the potential risks during volatile trading," NYSE spokeswoman said.

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I am half WTF and half that makes sense...

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tturner86 View Post
I am half WTF and half that makes sense...

I think the "risk" will just transfer a bit further down the chain, instead of stops being held at the exchange, just hold them at the broker, assuming they will take that "risk". I say "risk" because ultimately it's always the clients responsibility where a stop order gets filled, but I imagine some brokers may offer to hold the orders on their gateway servers in front of the exchange, so that clients don't have to rely on a software stop inside their client/platform.

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Big Mike View Post
I think the "risk" will just transfer a bit further down the chain, instead of stops being held at the exchange, just hold them at the broker, assuming they will take that "risk".

Troublesome, because instead of having the full book's liquidity helping you get filled, they are now at the mercy of the infrastructure and local broker/platforms ability to process a marketable order. The real problem of BS high frequency cancels making the book untrustworthy is completely overlooked and they pass the buck to the brokers.

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Wow.

Stops are not really protective against a big drop, exactly because of this (you won't get filled until way down.) But they can have a place on ordinary days.

This will affect a lot of people's trading. Will it make anything actually safer? Somehow I doubt it. Has it been proven that cascading stops cause big drops? I wonder about that.

It could, of course, convince someone to be more disciplined and attentive to his position. But for many individual retail traders, not having the automatic discipline of a stop may just open them up to more losses, much of the time.

Bob.

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bobwest View Post
Wow.

Stops are not really protective against a big drop, exactly because of this (you won't get filled until way down.) But they can have a place on ordinary days.

This will affect a lot of people's trading. Will it make anything actually safer? Somehow I doubt it. Has it been proven that cascading stops cause big drops? I wonder about that.

It could, of course, convince someone to be more disciplined and attentive to his position. But for many individual retail traders, not having the automatic discipline of a stop may just open them up to more losses, much of the time.

Bob.

Wasn't a stop order "only" a limit order with a very wide limit in modern electronic exchanges ?
Maybe it is just a legal thing, because of the name.

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Why are they going backwards? Why should a broker who sells overflow be holding your stop? Does this not create a big conflict of interest in terms of broker Internalization? This looks like a new revenue revenue stream for brokers more than anything else. Brokers can charge more on stop orders, plus have more information to execute against it/ or to on sell it.

Using a black swan event to justify this change is ridiculous.

"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"
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Neo1 View Post
Why are they going backwards? Why should a broker who sells overflow be holding your stop? Does this not create a big conflict of interest in terms of broker Internalization? This looks like a new revenue revenue stream for brokers more than anything else. Brokers can charge more on stop orders, plus have more information to execute against it/ or to on sell it.

Using a black swan event to justify this change is ridiculous.

Can't wait to hear the TD spin on it.

"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"
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Neo1 View Post
plus have more information to execute against it

This part is certainly not true, come on this isn't Forex! If you are talking about selling order flow, but I am 99% sure it only applies to actual market orders being executed, and not resting orders or limit orders.

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