Monday, October 8, 2007

New Reserve Display Requirements

Last week, the NYSE implemented a new rule that Ray over at Hybridtalk posted on.

You can check his post here.

From a daytrading perspective, it doesn't sound good.

If I understand it correctly, it means that if a customer wished to execute say, a 10,000 share buy order at a specific price, that they don't have to display the full order, instead, they can choose to only display a portion of that order (that would be shown on the tape) and hold the rest in "reserve." Essentially, this protects the customer from tipping his hand and letting people to trade off of his order.

Sounds great, if you're a robot or a huge institution with larger orders to execute. However, for the small fries and humans, it sounds like we're getting the shaft again.

This seems to be the overriding theme of the Hybrid Market since it's inception. Great for the large institutions, bad for the little guys. And really, since I'm sure the overriding percentage of the daily trade volume is coming from the mutual funds and large brokerage houses, I can't blame the NYX for this kind of stuff. However, that doesn't mean I'll like it.

I guess the days of seeing a huge market short stepping down or watching a huge bid "step up" are over. It's time to just get used to the fact that the tape will always read 1x1. No one is going to show the size of their orders if they don't have to.

Goodbye market transparency, hello robots.


wincity said...

I doubt this would amount to anything. The size data is meaningless anyway, often misleading actually. Besides, I'm sure the big boys can hide their intentions if they so desire. Even I can hide my real size with Interactive Brokers.

Dinosaur Trader said...

Well, if you've ever used "the tape" to try and figure out which direction a stock is going to go, it is just another nail in the coffin of that trading strategy.

The writing has been on the wall though... no big surprise.


SerpentMage said...

Have you thought about switching brokers?

IB has had this for ages, and they call it the iceberg order. And IB is for the little guys...

Dinosaur Trader said...


No, I'm not interested in hiding my orders... I'm interested in total market transparency, where no one is allowed to hide their orders!

If the big guys are in the market to buy 10,000 share chunks of a stock, I want to know because they will move the stock.