Figured I would start a separate thread to post the things I learn about how the market functions from various sources.
I started reading "Dark Pools: Rise of the Machine Traders and the Rigging of the US Stock Market." One interesting observation that I wasn't aware of before is the preference that exchanges give to order size in the options market - where the largest orders jump to the front of the line.
I did a little experimenting in Interactive Brokers and it is really obvious that it occurs. For instance, you might see a bid of $0.07 and an ask of $0.09, each with order sizes in thousands of contracts. I entered an order to sell (ask price) of $0.08 for a few contracts and sure enough, all the other orders started trying to front run at that price. Instead of showing my order size as the first in line, there were order sizes at the same price with thousands of contracts being offered.
The only time your limit order gets executed is when the market moves against it.
No idea why preference should be given to order size instead of the time that the order was entered. Seems like an easy fix to avoid the algo option front-running that is rampant if they were indeed interested in fixing that BS.
I'll post other interesting facts as I find them. Feel free to post any interesting info you run into.
I started reading "Dark Pools: Rise of the Machine Traders and the Rigging of the US Stock Market." One interesting observation that I wasn't aware of before is the preference that exchanges give to order size in the options market - where the largest orders jump to the front of the line.
I did a little experimenting in Interactive Brokers and it is really obvious that it occurs. For instance, you might see a bid of $0.07 and an ask of $0.09, each with order sizes in thousands of contracts. I entered an order to sell (ask price) of $0.08 for a few contracts and sure enough, all the other orders started trying to front run at that price. Instead of showing my order size as the first in line, there were order sizes at the same price with thousands of contracts being offered.
The only time your limit order gets executed is when the market moves against it.
No idea why preference should be given to order size instead of the time that the order was entered. Seems like an easy fix to avoid the algo option front-running that is rampant if they were indeed interested in fixing that BS.
I'll post other interesting facts as I find them. Feel free to post any interesting info you run into.
Market Dynamics
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