TRADE orders rejected

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1

Recently I’ve been seeing an issue where some subset of orders I submit to trade are getting rejected. It seemed like a one off initially but today when I tried to submit trades I’m seeing 4 stocks rejected immediately upon submission. Can somebody help investigate?

Currently I have 4 rejected orders sitting in the Completed list on my Trade activity.

David

2

Hi David,
Any chance those are stocks that are now required to trade in 5 cent increments? I know that have been popping up frequently in my manual IB trades.

3

I just bought 1 share of IBM using Relative 0.01 . So I think Dan is right. The spread on those is 10 cents

4

Yes I think you’re right - when I put these through as limit orders they went through fine. Thanks!

David

5

Sold my 1 share of IBM for 1 penny more. But my transactions costs where $2 :slight_smile:

6

Dan,

If you don’t mind, I wonder if you could comment on whether the nickel spread has changed your trading or estimates of slippage in anyway. I understand that is only 400 stocks that are most affected by the “Trade At” requirement.

Thanks.

Jim

7

Anyone would have the link to find that list of ~400 stocks that don’t take 0.01-cent increment anymore?
Also -out of curiosity- is this an IB limitation or is it exchange/regulation-driven?

(Edit: a quick google search was not helpful)

I encountered a couple of examples in the last few months and I had to manually adjust my limit orders for them to be accepted by IB.
I don’t use TRADE but my own interface with the IB API and if I have the list I could make sure that all my limit orders are directly sent over at a valid price…

Thanks in advance,

Jerome

8

I just traded Timken at Vanguard and they had 5 cent increments for my Limit order. They said it was part of a pilot program for the SEC. I called Vanguard and they said they thought there was about 150 tickers in total as part of the trial. It applies to all prices for stocks (even low priced ones, which I find curious). Vanguard thinks it will go inro 2017. The goal is to increase liquidity. Not sure what that really means in the context of setting price increments.

9

Jerome,

Here is a link with the list of stocks. Note there are different groups including a control group. There are actually more than 400 stock that require nickel increments but the slippage is less for those that are not in the “trade at” group.

[url=http://ftp://ftp.nyxdata.com/Tick_Pilot/Tick_Pilot_Historical/NYSE_Group_Tick_Pilot_Assignments.txt]ftp://ftp.nyxdata.com/Tick_Pilot/Tick_Pilot_Historical/NYSE_Group_Tick_Pilot_Assignments.txt[/url]

10

The nickle spread idea came from the SEC. It affects 1200 stocks - split into 3 groups with different rules (see the end of the article below). Somehow they think this will increase the volume on for smallcaps. Personally, I am less likely to trade these because it seems like I get worse fill prices. I dont see any way to determine if that is true or not, but that how it feels. I had one the other day that was a $2 stock. A nickle spread is a big deal on a $2 stock. Hard to believe they didnt require a price of $10/share as a minimum for it to be included in this experiment.

There are lots of articles on this. Here is one: http://www.cnbc.com/2016/09/30/trader-talk-ready-to-start-trading-in-nickels-its-happening-with-small-cap-stocks.html

I think the reason smallcap volume has dropped is that most likely the trading volume for all stocks has dropped if you eliminate trades by the high frequency traders. They kept the volume up on the large caps, but they cant trade small caps effectively.

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Dan,

Could not agree more.

Thank you for your sharing your real life experience on this.

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Thank you Dan & Jrinne

With the pointers you gave me (explanation and links), I have been able to do a bit more digging.

The “definitive” details / explanations seem to be here → Tick Size Pilot Data Collection Securities Files | FINRA.org

This page also has a link to a text file (http://tsp.finra.org/finra_org/ticksizepilot/TSPilotSecurities.txt) listing the securities that are part of the test as of today.
There are -today- 2385 of them.

In those 2385 securities, there are indeed 4 groups (and the above text file has a code to know which securities belong to which):
C - Control Group
G1 - First Test Group
G2 - Second Test Group
G3 - Third Test Group

Do you guys share my understanding if I state that:

  1. the only group of securities that is of concern to us is group G3? (i.e. trade in 5c increments only)
  2. the group G2 is not a concern as retail investors are excluded. I assume this is taken from the declaration we made to our respective brokers when opening the account. Personally, I am Retail.

So this means, it will impact our trading for 398 G3 category securities if I counted correctly… File extract is attached

Thx

Jerome

G3 securities only.txt (20.1 KB)

13

That assumes that there is another retail investor that has an order I can be matched up with: maybe.

If my order is matched with an institutional investor then no benefit or exclusion, I guess. The institutional side will surely trade at a nickel increment it seems. There might be a way to match a retail non-nickel increment order with an institutional order within the pools. If there is no formal way to do this maybe there will be a niche for high volume “retail” traders matching retail and institutional orders.

The retail investor exclusion and the ability of the pools to offer “price improvement” makes the result for a retail investor totally unknown to me. I am not even entirely sure there would not be a benefit for the retail investor. The pool’s algos or traders may have a preference for retail orders at non-nickel increments if they can be matched to the institutional orders–or not.

But if the retail investor is excluded, why won’t IB take your order unless it is in nickel increments? I’m missing something on the “exclusion.”

As Dan says. This is potentially a big deal for a $2 stock. Maybe I will get it eventually.