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Dear Group,
I may be wrong, and if right, this may be arcania, but I believe there has been
and may be use for a buy-limit order above, at least slightly above, the market
with pit (not electronic) trading. Pit orders are executed by humans, and as it
was explained to me by an old retail S&P pit-trader, they are only human and
like to be "better than average" and "go the extra mile." Filling a buy-limit
order a tick or two below the limit price allows them to show themselves, their
firm, and the customer that they possess those qualities. Through their phone
clerks, they get to tell their customer "Filled at [a tick or two] below your
limit" --- what a deal --- everybody's happy. That challenge and opportunity
does not present itself in the filling of a market order, there being little way
to provide objective evidence as to the floor trader's skill in filling such an
order.
Another practical reason for using a buy limit order slightly above the market
in pit trading is simply to guard against the possiblity that in the duration
after phoning in one's order and before the order is executed in the pit,
strange things don't happen, eg, rumor begins that MSFT has been vindicated in
its lawsuits.
Limit orders have the potential to provide more opportunity at less risk than do
market orders --- perhaps not always, but on occasion.
Sincerely,
Richard
Andrew Nopper wrote:
> I think that the two of you may be talking at cross purposes. Hans is right
> that a buy limit placed above the market is "bullshit". It will work without
> a doubt, but then it's a market order in reality, and anyone in their right
> mind wouldn't go through the extra steps involved in placing a limit rather
> than a market order. However, as Jeff pointed out, this IS what happens to a
> market order when it gets into Globex. As Globex does not natively handle
> market orders, the market order to buy is converted to a limit order at
> (generally) 10 handles above the market, thus ensuring an immediate fill
> even in fast markets.
>
> Seems like everyone is right. :)
>
> Andrew
>
> ----- Original Message -----
> From: hans esser
> To: omega-list@xxxxxxxxxx
> Sent: Monday, June 03, 2002 11:23 AM
> Subject: Re: Bad ticks caused by Wrong Orders
>
> > Jeff,
> >
> > thanks for fedback.
> >
> > I talked to my broker and he assured me that a buy limit order placed
> above the
> > market on Globex will be executed right away.
>
> OFCOURSE it will - because the order is bullshit
>
> What you plan to do above the market is a BUY_STOP order and nothing else
>
> rgds hans
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