July 26, 2012 : Salami Slicing Sub-Penny Style

A study of 41 billion trade reports since 2006 reveals a clear winner from retail price improvement. Hint: it's not the retail trader.

June 4, 2014 : Economically Insignificant Price Improvement 2

Who buys and sells 3 shares at the same exact time? This interesting event exposes an internalizer stepping in front of posted liquidity on lit exchanges by an economically insignificant amount.

April 9, 2014 : Economically Insignificant Price Improvement

Did you know that most retail stock orders never execute on an exchange? Most retail orders are "internalized" by a "wholesaler" or more aptly, an "internalizer", many of which claim they match retail buyers and sellers, and even give both buyers and sellers a little extra - something they call "price improvement".

Jan. 29, 2014 : Sub-Penny Update

Plotted by percentange of total volume of all sub-penny trades with price improvement of $0.0001 through $0.0049. The most common price improvement amount by far, is the bare minimum: 1/100th of a cent per share.

Oct. 9, 2012 : The Mini Knight

On October 9, 2012 between 10:02:20 and 11:01:15, there were at least 449 bad prints in 253 stocks (view in google docs, or download it) which caused price spikes on charts. All bad trade prints were from NqTRF (dark pools) and ended in 0.xx40 or 0.xx60. At the end of the day, 437 bad trades were corrected with new prices, and 12 trades were outright canceled. Almost all of the corrected trades have new prices that differ from the original price by $0.444 which is bizarre.

Sept. 6, 2012 : Berkshire Hathaway (Again)

Imagine buying a house. You do all the leg work: inspections, market analysis, etc. and arrive at a fair price which you then submit, in writing, to the seller. Suddenly, one second before closing, another buyer with special privileges shows up and offers the seller a penny more than you, and wins the property. The seller has no choice in the matter, they have to sell to the highest bidder. Think that is outrageous? It gets worse.

Aug. 27, 2012 : Macy's 60,000 Share Sub-penny Trade

On August 27, 2012 at 9:44:40, a trades for 60,000 shares in Macy's (symbol M) was reported from the Nasdaq Trade Reporting Facility with a sub-penny price of $39.7489.

Aug. 24, 2012 : Facebook Sub-penny Trades

The charts below show sub-penny trades in Facebook on May 18, 2012, the day of their IPO. Trades priced in sub-penny fractions between 51 and 99 are colored light green, and those priced in fractions between 1 and 49 are colored in red.

Aug. 23, 2012 : Strike Three

Analysis of sub-penny trade data doesn't support SEC's conclusions about internalizers as written in the final flash crash report. There is abundant evidence that internalizer software was acutely sensitive to the integrity of the consolidated feed and would switch off internal matching only if and only when the quote was crossed. Furthermore, short term volatility had little, if any impact on the number of sub-penny trades. About the only thing our findings have in common with the SEC report on this matter, is that the date in question was May 6, 2010.

Aug. 22, 2012 : NYSE Retail Price Improvement

August 1, 2012 marked the start of NYSE's new Retail Liquidity Price Improvement (RLP) program. Retail order flow would be directed to special Retail Liquidity Providers who would offer a better prices for retail trades in whole 1/10th of a cent increments.

Aug. 21, 2012 : Sub-Penny For Your Thought

The image below was created by taking all trades that have prices requiring 3 or 4 decimals places and grouping them into 99 bins by using the last 2 digits of the price. For example, a trade with a price 27.6501 goes in bin 1, and a trade with a price 62.5463 goes in bin 63.

Aug. 20, 2012 : August 2011 Volatility

August 2011 set a number of stock market records for trading activity, quote counts, and volatility. Investors blamed High Frequency Traders (HFT) for the wild market moves, and at least one HFT actually blamed investors!

Aug. 16, 2012 : Where is the Sub-penny Competition?

Well this is unexpected. Chart 1 below shows total volume for stock trades by fraction of a penny. The top pink/red line represents total share volume for prices 1/100th of a cent from nearest whole cent. The cyan/blue line below that is the total share volume for prices 2/100th through 9/100ths of a cent from the nearest whole cent. If there were healthy competition, the cyan/blue line should be above the pink/red. And we should see a better distribution of trades at 2/100 through 9/100.

July 30, 2012 : Bad Apples in AAPL

On July 24, 2012, at 09:31:28 Eastern time, a 100 share trade of AAPL crossed the tape at a price of 609.1499 for a transaction value of $60,914.99. At the time of the trade, the national best bid/offer (NBBO) was 609.00 bid and 609.15 offer. This indicates an investor (Investor A) bought AAPL for $0.0001 (1/100th cent) less than the prevailing offer of 609.15: a total savings of 1 penny on a $60,915 transaction. This is called price improvement.

July 24, 2012 : Sub-penny Price Anomaly

We recently grouped all trade execution reports priced with 3 or more decimal places into 100 different bins by using the 2 digits that represent hundredths of a penny. We only include trades priced above $5 from NYSE, ARCA, and Nasdaq listed equities. For example, a trade with a price of 27.8099 is added to bin 99 (last 2 digits), while a trade with a price of 56.2520 is added to bin 20. We did this to see if anything interesting came out of the data (and found quite a surprise!)

July 19, 2012 : Memo on Use of Market Orders

In case anyone missed the memo, the use of market orders practically guarantees poor fills. Use of limit orders practically guarantees that you will have to wait minutes, hours, or forever for your fill, because a market maker has jumped in front of your order by 1/100th of a cent in order to give the retail customer a (slightly) better price. But limit orders are another topic.

April 26, 2012 : Quotes/Trade Ebbing?

As of 10:20am, the 1-minute Average Quote/Trade ratio for U.S. Equities, is brushing against 1 year lows. Today is thick red line that is horizontal at time of capture (10:20).

May 1, 2011 : Strange Days Citigroup Split and Dead Robots