How to set OrdType(40) for Discretion Order?

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1

Imported from previous forum

2

[ original email was from Tony H. ZHU - hong_zhu@jft.com ]
Hi,

For the New Order Request - Single(MsgType=D), if the order is a discretion order, which value should be set for OrdType(40)? I am considering to set it to ‘6’(With or without), but do NOT know it is right or not? Thanks in advance for any tips!

Regards,
Tony

3

[ original email was from Ryan Pierce - rpierce@taltrade.com ]
> Hi,
>
> For the New Order Request - Single(MsgType=D), if the order is a discretion order, which value should be set for OrdType(40)? I am considering to set it to ‘6’(With or without), but do NOT know it is right or not? Thanks in advance for any tips!

With or Without has to do with stock odd lot trading. It has nothing to do with discretion.

To quote the glossary:

Limit With or Without: An order to be executed at a limit price, with or without round-lot sales; valid only for odd lot orders. [OrdType]

FIX 4.2 introduces discretionary pricing. You send the order as a Limit order, and specify:

DiscretionInst = 0 (relative to displayed price)
DiscretionOffset = amount of discretion (must be negative if selling)

I.e.

OrdType = 2 (Limit)
Side = 1 (Buy)
Price = 50
DiscretionInst = 0
DiscretionOffset = 0.5

This is a limit order to buy that displays at 50, but the trader can go up to 50 1/2.

OrdType = 2 (Limit)
Side = 2 (Sell)
Price = 50
DiscretionInst = 0
DiscretionOffset = -0.5 (NOTE THE SIGN)

This is a limit order to sell that displays at 50, but the trader can go down to 49 1/2.

4

[ original email was from Tony H. ZHU - hong_zhu@jft.com ]
> > Hi,
> >
> > For the New Order Request - Single(MsgType=D), if the order is a discretion order, which value should be set for OrdType(40)? I am considering to set it to ‘6’(With or without), but do NOT know it is right or not? Thanks in advance for any tips!
>
>
> With or Without has to do with stock odd lot trading. It has nothing to do with discretion.
>
> To quote the glossary:
>
> Limit With or Without: An order to be executed at a limit price, with or without round-lot sales; valid only for odd lot orders. [OrdType]
>
> FIX 4.2 introduces discretionary pricing. You send the order as a Limit order, and specify:
>
> DiscretionInst = 0 (relative to displayed price)
> DiscretionOffset = amount of discretion (must be negative if selling)
>
> I.e.
>
> OrdType = 2 (Limit)
> Side = 1 (Buy)
> Price = 50
> DiscretionInst = 0
> DiscretionOffset = 0.5
>
> This is a limit order to buy that displays at 50, but the trader can go up to 50 1/2.
>
> OrdType = 2 (Limit)
> Side = 2 (Sell)
> Price = 50
> DiscretionInst = 0
> DiscretionOffset = -0.5 (NOTE THE SIGN)
>
> This is a limit order to sell that displays at 50, but the trader can go down to 49 1/2.
>
>
>

Thanks, Ryan! It is very clear for a discretion order with limit price. But in our system, the discretion order can be set without limit price. Any tips for this case, set the DiscretionInst to some other value? Thanks in advance?

Regards,
Tony

5

[ original email was from Ryan Pierce - rpierce@taltrade.com ]
> Thanks, Ryan! It is very clear for a discretion order with limit price. But in our system, the discretion order can be set without limit price. Any tips for this case, set the DiscretionInst to some other value? Thanks in advance?

I’m somewhat confused here. Do you mean to say that:

  1. The order has no limit price at all, and is to be executed or not at the complete discretion of the trader?

or

  1. The order is a limit order, but the limit price is not firm, i.e. the trader has discretion to execute it at a price worse than the limit, and there isn’t any monetary limit to how much discretion the trader has (i.e. you are not saying you’ve got 1/2 point leeway.)
6

[ original email was from Tony H. ZHU - hong_zhu@jft.com ]
Thanks. I means case 1.

> > Thanks, Ryan! It is very clear for a discretion order with limit price. But in our system, the discretion order can be set without limit price. Any tips for this case, set the DiscretionInst to some other value? Thanks in advance?
>
> I’m somewhat confused here. Do you mean to say that:
>
> 1. The order has no limit price at all, and is to be executed or not at the complete discretion of the trader?
>
> or
>
> 2. The order is a limit order, but the limit price is not firm, i.e. the trader has discretion to execute it at a price worse than the limit, and there isn’t any monetary limit to how much discretion the trader has (i.e. you are not saying you’ve got 1/2 point leeway.)
>
>

7

[ original email was from Ryan Pierce - rpierce@taltrade.com ]
> Thanks. I means case 1.

I’m going out on a limb here, and I’d like input from others who are more familiar with the Not Held instruction.

I recall that the NYSE had a flag called Not Held that, when combined with a Market order, means that the specialist receiving the order had discretion over time and price in executing the trade. The specialist is thus Not Held to the current quoted price, since the specialist may think a better price is forthcoming, sit on the order, be wrong, and end up getting a worse price for the customer.

My understanding is that within NYSE this tag is largely obsolete as specialists can no longer handle such orders.

If these orders you call "discretionary" are orders that have absolutely no price associated with them, must be traded sometime that day, but can be traded at any time or price, I think Market with ExecInst Not Held might be a good representation.