Fills and Market Makers and their Machines

[nickola.pazderic]

Billy,

I'd like to raise an issue about fills.

If market makers note pre-market sizable orders for, say, IWM @82.21, how will this affect their actions at the open?

I'm sure they have more than one response, depending on their positions relative to the market.

But if you could educate me on this, I would be once again in your debt. However, if you've spelled it out previously, my apologies.

Of course, this question is based on the practical problem of whether or not one should place pre-market limit orders for the market open at precisely the prices dictated by the robots. Or, should one play some "games" and conceal ones orders until the market makers and machines have shown their hands for the morning or day?

Many thanks,

[Billy]

Nickola,
There is a big difference between sizable limit orders at the open on an individual stock and on an ETF.
IWM Market makers are much more concerned with the aggregate limit orders on the 2,000 component stocks of the index than with the limit orders on IWM itself. Indeed, they can create or delete IWM shares at will and do it all the time, arbitraging with the component stocks or derivative instruments to reflect the closest possible instantaneous value of the basket.
There are dozens of market makers acting on IWM, all arbitraging in real-time to best reflect the closest underlying value of IWM, so it's almost impossible for any of them to "trick" you on limit open orders. They may scalp you 1 or 2 cents at times, but that's about the worst they can do.
Billy

[nickola.pazderic]

I think my question shows my naivete and lack of understanding of the size and character of global equities and derivatives markets. I'm very glad to have your thoughts on it. I only see the world of money from my tiny space in my home office. At times it seems I'm alone with the market. So like a penitent before the cross, I make my calls, believing I'm being heard and that the market will somehow bestow riches. I understand the entire situation anthropologically; I've chronicled folk religious practices in anthropological journals and books. And when I hear of other speculators speak of "the market", I know they, too, apprehend it as all powerful and somehow concerned with them. But this knowledge does not help my decision making. Only clear insights into the business itself can allow me to break from the trap in which consciousness falls.

thanks always,