Imported from previous forum
Does anyone else find the scenario in D8 a little surprising? Specifically, after an order is received and COMPLETELY filled, a Cancel/Replace is received which I would expect to be REJECTED, given that the order was completely filled and closed. However, the matrix shows the Cancel/Replace being accepted and applied, essentially re-opening the order for the incremental quantity? How long after an order is filled must it remain available for increases in quantity?
Any feedback or thoughts on this are greatly appreciated.
[ original email was from John Greenan - john.greenan@alignment-systems.com ]
Hi,
A little surprising, maybe, but explainable…
Take this scenario. Buy side A places an order with sell-side B in the morning for 100k vodafone shares. This is a very liquid stock so lets suppose that the order is filled in three partial executions.
This would be communicated as a series of execution reports.
Later on that day A decides that they want a total of 200k of Vodafone.
Rather than send a new order they send a cancel/replace on the existing order to increase the size from 100k to 200k. The sell - side then receives this and rather than rejecting accepts this and gets another 100k of shares.
Why? In some cases the buy-side will pay a custodian based not on the number of executions but on the number of tickets (individual orders). By allowing the buy-side to increase the size the sell-side is helping out by reducing the cost of doing this deal to the buy-side.
I’ve seen this done a number of bulge bracket houses.
Typically the order would allow the D8 transition to occur up until a done for day has been sent to the buy-side - often at market close. This makes sense, as the market is still open so the sell-side would accept another order in the same stock.
Get in touch off-line if you’d like to discuss this further.
Regards,
John
> Does anyone else find the scenario in D8 a little surprising? Specifically, after an order is received and COMPLETELY filled, a Cancel/Replace is received which I would expect to be REJECTED, given that the order was completely filled and closed. However, the matrix shows the Cancel/Replace being accepted and applied, essentially re-opening the order for the incremental quantity? How long after an order is filled must it remain available for increases in quantity?
>
> Any feedback or thoughts on this are greatly appreciated.
>