Lock And Cross

, ,
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Imported from previous forum

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A Quote addition/modification may result in lock/cross. Is there a tag which can be used to override the same. Like the user can opt for rejection of the quote if it results in a lock/cross or he can choose to override and add the Quote.

ExecInst looks like one tag which can be used , it has a valid value of Ok to Cross , but it does not have a value to indicate whether it is ok for quote to lock ?  Are we missing any valid value of execInst which can indicate the same.

Thanks and regards,
Pavan

pavan@ssi-technologies.com

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[ original email was from Ryan Pierce - rpierce@taltrade.com ]
> ExecInst looks like one tag which can be used , it has a valid value of Ok to Cross , but it does not have a value to indicate whether it is ok for quote to lock ? Are we missing any valid value of execInst which can indicate the

That is not the meaning of that ExecInst value. In a situation where a buy-side institution sends order flow to a sell-side broker, OK to Cross and Do Not Cross refer to whether or not the sell-side broker is allowed to take the other side of the trade, thus trading against a proprietary position the broker holds.

I think what you suggest may be a good addition to quoting. However, I would suggest that there are at least four actions that can be done in response to a quote that locks/crosses:

  1. Post it anyway. I would imagine a lot of markets would view this as illegal.

  2. Reject it.

  3. Reprice it. Example: if the bid is 50.00, the offer 50.04, the minimum increment is 0.01, a quote to buy at 50.06 could be displayed as a bid at 50.03, and, if the offer moves upward, move the bid so it is 0.01 less than the offer until it reaches 50.06. This might be illegal in certain instances for some markets as well. In particular, the US has display rules about market makers not displaying the best price of agency orders that they hold, although I don’t know what these rules specify if the customer orders lock/cross the national market.

  4. Execute it. The exchange sends matching executions to the party quoting and the parties whose quotes were locked/crossed.