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4.2 Changes
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Re: CashOrderQty vs. OrderQty
Roseate L. Wagner / Merrill Lynch
7 Oct 2005 1:35PM ETJohn,
Thanks for the nice response.
In case of re-calculate the orderqty due to the market movement base on CashOrderQty, which will result changing of tag38(orderqty) of the order as well as the subsequent leaveQty of the order, does the fix protocal support such change for an order? - considering tag38 as one of the basic order attribute of an order, I'm concerned if the change if this value value will break the chain of msg.
Is there any common practice for such scenario?
Thanks,
Roseate
> > Hi, The 4.2 spec for tag152-CashOrderQty indicates 'Broker is
> > responsible for converting and calculating OrderQty in shares for
> > subsequent messages.'
> >
> > Does that imply that the orderqty shall only be converted at the
> > beginning of the trading of the order? Or can the broker re-adjust the
> > ordertqy base on the market price through the course of the order, esp
> > for a GT cash base orders?
> >
> > Thanks, Roseate
>
> Hi Roseate,
>
> I like this question.
>
> CashOrderQty must somehow be treated similar to a limit order. The order
> submitter has indicated that he/she is willing to accept a quantity of
> shares that is purchased for an amount that is less than or equal to the
> CashOrderQty but would be within his/her rights to refuse a quantity of
> shares that was purchased for more than CashOrderQty.
>
> So if the sell-side is submitting a buy order to an execution venue, it
> should be done with a calculated OrderQty and a (Limit)Price based upon
> current market data information such that (OrderQty * Price <=
> CashOrderQty). You could even choose how aggressively to interpret the
> order when calculating the Price and OrderQty. The Price you use doesn't
> necessarily have to be the Ask price. A more aggressive calculation
> could give better execution quality (lower purchase price and higher
> number of shares) while running the risk of not being filled.
>
> Bear in mind that the customer may submit the order with a limit price.
> If the calculated price from market data is greater than the submitted
> limit price on the order, the submitted limit price must be used. Again,
> the formula must still be (OrderQty * Price <= CashOrderQty). If the
> submitted limit price is used because it is less than the current
> calculated price from market data, you may not get any fills at all
> unless the price dips. Perhaps this is how the buy-side indicates how
> aggressive the order should be.
>
> So staying within the terms specified by the order submitter is clearly
> manageable and is of the primary importance.
>
> The next issue is how often (or whether) you re-calculate the OrderQty
> based upon a moving price of the stock. If you never recalculate based
> upon shifting market data for volatile stock, the only thing you risk is
> a slightly unhappy customer. Nevertheless you have still stayed inside
> the parameters he/she specified. Going the extra mile is where we all
> add value, so the more often you recalculate for a volatile stock, the
> closer you will be to the CashOrderQty and the happier your customer
> will be. Insufficient recalculations and adjustments of the order will
> result in the cash equivalent of an underfill. If it resulted in a big
> enough underfill, you could even regard this as a partial fill and try
> for some more.
>
> Please bear in mind that everything I mentioned above is using a buy
> order as an example. For a sell order, the user is still indicating a
> limit: I want to sell $1,000,000 worth of shares. You shouldn't sell
> more than the amount the user is requesting, but you could sell less
> than that (or am I wrong? You should maybe try and sell as near as
> possible to $1,000,000 but it must be at least $1,000,000?).
>
> Lastly, I wouldn't like to handle this order type if it was submitted
> with all-or-none instructions....
>
> I hope this rambling post helps.
>
> JohnP
Re: CashOrderQty vs. OrderQty
Roseate L. Wagner / Merrill Lynch 7 Oct 2005 1:35PM ET
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