Imported from previous forum
I have run across a following situation - a buy side submits a cancel replace request and as a result may receive a quantity that is somewhere in between what he/she asked. I could foresee this scenario if the resulting transaction would leave no open (leaves) quantity. This would mean a sell side cancel replaces what is possible. Here is the scenario:
New Order SE1 IBM SELL 20000 shares @ 90.
Execution ER2 New Order SE1.
Cancel replace CX3 IBM SELL 15000 shares @ 91.
Execution ER4 Cancel Pending CX3
Execution ER5 Fill SE1 1500 shares IBM @ 90.
Execution ER6 New Order CX3 IBM SELL 16500 shares @ 91 (cumulative filled quantity is 1500).
In this scenario a buy side requested total quantity (not open quantity) to be 15000 but received 16500, there is plenty of leaves (open) quantity that would satisfy the change. This situation looks like is happening when the order is sent to a DOT (so is cancel replace) by a broker’s system. Even so, I would think that the final results (execution report ER6) would cause an alarm on a broker’s side stating that the request issued by a buy side can not be granted. Then a manual intervention may be necessary (at the broker’s side), where additional reduction of order quantity is requested. I think it is easier to work with either a grant of request or a reject, I may be wrong assuming that a broker’s system will always provide that.
[ original email was from John Armstrong - johna@ms.com ]
What the broker’s system is probably encountering
is the undesirable result of using the
"Cancel Balance" feature
in CMS. Since the broker did not know about
the 1500 shares at the time they sent the Cancel/Replace, they end up asking for more than
they really want and thus get overfilled.
This is the downside of using "Cancel Balance"
instead of non-cancel-balance replaces in CMS.
It exemplifies why it is better to use the "Total Order Quantity" approach that FIX employs.
> I have run across a following situation - a buy side submits a cancel replace request and as a result may receive a quantity that is somewhere in between what he/she asked. I could foresee this scenario if the resulting transaction would leave no open (leaves) quantity. This would mean a sell side cancel replaces what is possible. Here is the scenario:
> New Order SE1 IBM SELL 20000 shares @ 90.
> Execution ER2 New Order SE1.
> Cancel replace CX3 IBM SELL 15000 shares @ 91.
> Execution ER4 Cancel Pending CX3
> Execution ER5 Fill SE1 1500 shares IBM @ 90.
> Execution ER6 New Order CX3 IBM SELL 16500 shares @ 91 (cumulative filled quantity is 1500).
>
> In this scenario a buy side requested total quantity (not open quantity) to be 15000 but received 16500, there is plenty of leaves (open) quantity that would satisfy the change. This situation looks like is happening when the order is sent to a DOT (so is cancel replace) by a broker’s system. Even so, I would think that the final results (execution report ER6) would cause an alarm on a broker’s side stating that the request issued by a buy side can not be granted. Then a manual intervention may be necessary (at the broker’s side), where additional reduction of order quantity is requested. I think it is easier to work with either a grant of request or a reject, I may be wrong assuming that a broker’s system will always provide that.
>