is a very powerful tool that is intended for serious traders.
It is possible to buy or sell hundreds of thousands of dollars
of stock by pressing a single key. You are responsible for every
trade done on your Watcher,
even if you didn't "mean" to do it. While we work day
and night to make the Watcher
the most powerful, reliable, fast, and secure program in the world,
there are lots things we cannot be responsible for (like trucks
that crash into MCI fiber optic lines or woodchucks who like to
eat NASDAQ power cables.) In any case, fully automated trading
is on the cutting edge of technology, and you must accept all
the associated risks of equipment and software failures.
Furthermore, because we are
always improving the Watcher
software (sometimes new and improved versions come out daily),
this manual could never be complete. It is intended only to give
you a general idea of how the whole thing works and then to get
lets you buy or sell NASDAQ stocks using either NASDAQ's Small
Order Entry System (SOES) or SelectNet system. It also tracks
any positions you might have, warns you of market activity concerning
your positions or other stocks that you are watching, and gives
you the latest quote and market maker movement information.
screen consists of three areas: the bottom, middle, and top.
The bottom area consists of three quote windows. The middle area
provides messages on trades that you might be doing, or on market
activity in stocks that you already have a position in. The top
area lets you look at different pages of information. You can
switch between pages by pressing the Function keys located on
the top row of the keyboard.
Getting a quote
To get a quote on a stock, simply
type the four or five letter stock symbol and press <Enter>.
The quote will appear in the quote window that is highlighted
by a yellow border. The quote shows you the:
The quote areas show you the market makers who have the best bid and ask prices. Those with the best bid prices are listed on the left, and those with the best ask prices are listed on the right. Market makers who are on the inside bid and ask are listed in blue.
A "*" appears next
to the market maker who most recently updated his quote.
An example quote area:
GEKA 99 x 99 ½ (3x1)
L 96 H 96 ½ -½ SM5
NQMS 99 TSCO 99 ½
COWN*99 GSCO 100
The above quote area shows a quote for a stock symbol GEKA. The up arrow indicates that the last bid tick was an uptick. The bid tick is important for short selling, which we will cover later. It shows that the inside market is
99 x 99 1/2 and that there are
three market makers at the bid (NQMS, COWN, and PIPR) each willing
to buy stock at 99. One market maker, (TSCO) is willing to sell
at the ask of 99 1/2. COWN most recently updated his quote. This
stock is an SM5 stock, which means we could, at most, buy or sell
500 shares per order on SOES. The average of the bid and the ask
is 1/2 lower than the average of the bid and ask at yesterday's
You can watch three different
stocks at the same time in the quote areas; however only one window
is the active window. This active windows is highlighted by the
yellow border. Pressing <Tab> or <Shift><Tab>
will switch your active quote window. All order entry is done
on the stock in your active quote window, so make sure you have
selected the right window before trying to enter an order.
To get a quote on a different
stock in the same quote window, just type the stock symbol and
You can change the size of the
quote window by typing
Where X is the number of display
lines you want in your quote window. You can change this as often
as you want. For example, if you want 7 lines in your quote window,
Don't forget the <space>
before the number.
All order entry is done by holding
down the <Shift> key and pressing a letter key, depending
on the type of order you want to do. An order will always be
entered on the stock in your active quote area.
SOES is NASDAQ's Small Order
Execution System. On SOES you, the customer, always buy stock
at the ask or sell stock at the bid from a market maker. SOES
orders are executed by NASDAQ on a first come, first serve basis
in price order. Each market maker will have one order executed
against him automatically every 15 seconds that he remains on
the inside market.
Since SOES orders are executed
automatically, they are a very powerful tool for getting executions
that otherwise would be impossible by conventional methods (i.e.
The maximum number of shares
that can be executed in a single order is determined by NASDAQ
on a stock by stock basis. Stocks break out into three SOES "tiers":
200 shares, 500 shares, and 1000 shares. For your reference,
these are shown in the quote area as sm2, SM5 and SM10.
SOES provides very fast order
entry for sales at the inside bid price and for buys at the inside
ask price. SOES orders are entered immediately after you press
the appropriate key. An entry message describing the order will
appear in the middle area of the Watcher
Since SOES orders are entered
immediately, please make sure that the correct stock is highlighted
in the quote window at the bottom of the screen.
|B||Buy 1 lot||S||Sell 1 lot|
|M||Buy 500 shares only||F||Sell 500 shares only|
Regular SOES orders are entered
at or near the current bid or ask price. Regular SOES orders
will either be executed or timed out after 10 seconds after 9:35
am. Before 9:35am, a SOES order will not be timed out for 30
seconds. Under normal circumstances, you will get either a "U
R Out" message indicating that the order could not be executed,
or an execution confirmation message in the middle area.
The Watcher has an additional feature that will automatically enter some SOES orders 1/8 away from the inside market in stocks that trade in quarters. Because SOES orders are executed in price priority order, this gives you an added advantage without any significant additional risk.
Monster Key SOES Orders
All SOES executions occur at
the current inside bid or ask price, regardless of the limit price
entered. Because SOES orders are executed in a time and price
priority ranking, by entering a SOES order at a price away
from the inside bid or ask price, you can give your order a higher
priority. The order will still be executed at the inside bid
or ask price. As long as the inside bid or ask remains the same
between when you place your order and when it gets executed, placing
a sell order below the best bid price or a buy order above the
best ask price will get you a faster or more likely execution
at the same price. NASDAQ permits SOES orders to be entered as
much as 20% away from the current inside market. The Watcher
can instantly compute the most advantageous price possible for
a limit order that will pass NASDAQ's screening. This is called
a Monster Key order. The risk is that if the inside bid
or ask change, then your order may be executed at whatever the
new inside bid or ask price is at the time of execution. This
may in fact be exactly what you want.
Here is an example: stock ABCD
is 10 3/4 bid. Terrible news comes out on the stock. You enter
a Monster order to sell ABCD. The Watcher
computes that 8 5/8 is the lowest possible limit price that will
not be rejected by NASDAQ, so it enters a limit order to sell
at 8 5/8. Since your limit is the lowest possible in the system,
you will get the next available sale in ABCD. If you missed the
10 3/4 bids, you're order will remain in force, and likely be
executed at new bid of 10 1/2.
Placing Monster orders offers
a better chance of execution, at the risk of getting that execution
at a worse price.
|H||Buy 1 lot at 20% above the bid||E||Sell 1 lot at 20% below the ask|
|K||Buy 500 shares at 20% above the bid||T||Sell 500 shares at 20% below the ask|
Monster orders are timed out
after 21 seconds after 9:35am. Before 9:35am, they are timed
out after 99 seconds.
While SOES is the most powerful
tool available to anyone to get executions on the NASDAQ stock
market, not all SOES orders entered get executed. The total number
of SOES executions available in a given stock at any moment depends
on the number of market makers on the inside market and how long
they stay there. If there are four market makers on the inside
ask price in a stock, then there is the potential for four immediate
buy executions on SOES. If you are one of the first four orders
in the system, you will get an immediate execution against one
of the market makers at the inside ask price. Only after each
of the market makers at the ask price has executed an order does
NASDAQ start queuing orders. Each market maker is given 15 seconds
to update his market before another SOES order is executed against
him. If he does not move after 15 seconds, the next order is
taken out of the queue in price and time priority order. This
means that the highest buy order is taken next. If several buy
orders are queued at the same price, the one that was entered
first is executed. This process continues until either all queued
SOES orders are executed, or all market makers have moved their
After you enter your SOES order,
it is transmitted to NASDAQ. If your order is executed, you will
see a message in your middle window telling you with whom you
did the trade. Your positions on page one will also be automatically
Once your order times out (10
seconds for normal orders, 21 seconds for Monster Key orders),
we will send NASDAQ a message to cancel it. Usually NASDAQ will
acknowledge the cancel and you will see a "you are out"
message ("U R Out") in the middle window. This means
that your order was canceled and can no longer be executed. You
are free to reenter the order if you still want to do the trade.
It is also possible to get a
"Too Late" message, which means that our cancel message
reached NASDAQ after the order was already executed; hence too
late to cancel. You should receive your execution soon.
Finally, you may see a "No
Find" message. These messages almost always occur at the
opening or when NASDAQ is having computer problems. The literal
meaning is the NASDAQ was not able to find your order to cancel
it; it is lost somewhere in their computer system. There is no
way to know what the final outcome of the order will be except
to sit back and wait. We will automatically continue to try to
cancel your order periodically until you get back either an execution
or a "U R Out".
"No Finds" can be
a real problem. With a "No Find" message, you do not
know the current status of your position. This is the reason
that we enter all SOES orders before 9:35AM with extended time-outs.
However, some traders are so frustrated by "No Finds"
that they choose not to enter orders unless necessary when "No
Finds" start showing up. Another strategy is to use Monster
Key orders to close out positions during 'No Find" storms.
If you think that NASDAQ, the
world's 2nd largest stock market, should be able to
fix such an incredible problem, you're right. Oh, well.
SelectNet is NASDAQ's optional
execution system that allows two parties to execute a trade at
any mutually agreed price. While you can theoretically enter any
SelectNet order, no one will execute that order unless they want
to. SelectNet is a very useful tool because it gives you the
opportunity to trade stock within or between the
inside market, like buying stock on the bid when a stock is going
down. With SOES you always pay the spread.
SelectNet orders can be placed
at any price, and can be preferenced against any market maker
or broadcast to all market makers. When you place a SelectNet
order, text will appear on the top line of the Watcher
screen. You can accept the default order price by pressing <Enter>,
or you can modify it and press <Enter> when you are ready
to place the order.
If you make a mistake or decide
you do not want to place the order, pressing the <Esc> key
in the upper left corner of your keyboard will clear the text.
|1||Bid for 2000 shares||-||Offer 2000 shares|
|Q||Bid for 1000 shares||P||Offer 1000 shares|
|A||Bid for 500 shares||L||Offer 500 shares|
After pressing one of the shift keys listed above, the top line of the Watcher screen will look something like:
The "N" indicates
a SelectNet order, the "B" means buy, followed by quantity,
symbol, and price. Press <Enter> to enter the order, or
press <Esc> to clear it. To modify the price, press the
left or right arrow keys. This will move the price up or down
by an eighth. Pressing the <Ctrl> key and a left or right
arrow key will move the price by a sixteenth.
To place a preferenced order
with SelectNet, type the market maker symbol after the price and
SelectNet orders will automatically
be canceled after one minute (three minutes for preferenced orders).
If you want to cancel the order earlier than that, press function
key F6, select the order you wish to cancel with the up and down
arrow keys, and then press the "\" key (which is above
the <Enter> key on most keyboards). Read section "SelectNet
Orders page" for more details.
If you try to place a SelectNet
order with a price outside the current marketplace that would
be bad for you if executed, you may see a message in the middle
screen area that says:
TO SELL STOCK AT OR BELOW THE BID. USE .O TO OVERRIDE
If you are certain that you want to place the order, just press ".O" and then the <ENTER> key.
also gives you a gateway to the fastest, fairest, most transparent
and least expensive trading system in the world: Island.
lets you place orders and view orders placed in a nationwide limit
order book system. This means that anyone who uses the Island
system can execute anyone else's order on Island.
Compared to SelectNet where only Market Makers are given the privilege
to take out orders, Island
gives buyers and sellers the opportunity to directly meet with
any middle man.
Every time you enter a SelectNet
order using your Watcher,
your order is automatically mirrored on the Island
book. You will see your own orders just as others see them on
You see orders that are on the
book any time you hit up a quote. The Island
orders appear in green at the top of the quote. They show the
quantity and price of the best available Island
orders. If you want to execute against one of these "greenees",
gives you keys to instantly enter a "takeout order".
take out orders can be entered whenever an Island
inside market is available. When you see a green quote listed
on a stock, you can use one of the following keys:
|U||Buy 2 lots||4||Sell 2000 shares|
|I||Buy 1000 shares||5||Sell 1000 shares|
|O||Buy 500 shares||6||Sell 500 shares|
take out orders are either executed immediately or cancelled.
Anytime an Island
order that improved the inside market is entered in a stock that
is on your ticker, you will see the new market in your ticker
window in blue.
The top area of the Watcher
screen lets you look at different pages of information, such as
a list of your positions, or a scrolling stock ticker. The function
keys across the top of the screen let you easily switch between
pages. Simply press a function key to see a page.
Watching Your Positions with the Position Page F1
This page shows an alphabetical
list of your positions and stocks that you have put on your ticker.
You can scroll through the list with the up and down arrow keys,
PageUp, PageDown, Home, or End. This page will show you how many
shares you are long or short the stock, the price you bought or
sold it, and other information.
2000 GEKA 29 ½ 30 x
30 ½ (2x1) 12:21
For example, the above line
on your Positions page tells you that you are have a 2000 shares
of GEKA. You bought it at 29 ½, the current inside market
is 30 x 30 ½, with 2 market makers at the inside bid and
one at the inside ask price. The last tick in GEKA occurred at
Watching Stocks with the Ticker Page F2
This page has two windows.
The window on the left is called the "TID" and shows
all inside market changes. The window on the right shows any market
maker update in a stock that you have added to your Ticker list.
The Tid window shows stock price changes that affect the inside spread. A line in the Tid window looks like:
NSCP 99¼ x 99½ +¼
This tells you the time of the
change, if the change is an uptick or downtick, the stock, the
current inside spread, which side of the spread (either the bid
or the ask) moved in which direction, and the net change.
Since the Tid window will show
you any inside spread change on any of 7000+ NASDAQ stocks, it
can become a very quickly moving window. There are two ways to
modify which stocks appear in this window. One is to specify
your default settings. This will let you eliminate an entire
tier level, or specify the range of stock prices that you are
interested in seeing in your TID window. For example, you could
have tier 2 stocks (those that you can only trade in 200 share
lots) eliminated for your Tid, see tier 5 stocks only if their
bid price is above $5, and only see tier 10 stocks if their bid
price is greater than $5 and their ask price is below $50. Since
stock prices change, and since new stocks are added, these settings
are used to refresh your Tid every day.
You can also remove stocks from
your Tid individually. Just press the minus key, "-"
, followed by the stock symbol. Typing -STOCK again will undelete
the stock and make the stock appear in highlights. Typing -STOCK
a third time will remove the highlighting, leaving you back where
you started from.
The window on the right is your
Ticker window. A line in the Ticker window looks like this:
(27 ¼ x 27 ½ ) (4x7) GSCO ticks down
This tells you the name of a
stock, the bid tick, the inside market, the number of market makers
on the inside bid and ask, and a brief text message that describes
what a market maker did in the stock.
The Ticker window shows only
stocks that you have added to your Ticker list. To add a stock
in the active quote area to your Ticker list, press the "*"
key, (<Shift> "8"). You will now see any market
maker activity in that stock in the ticker window. To take a
stock off your Ticker list, press "*" again.
You can have a stock highlighted
in a different color in your Ticker window. This is useful for
stocks that you want to pay special attention to. Use the "="
key to add or remove highlighted stocks to your Ticker.
If you want to see a list of the stocks that you have put on your Ticker list, press F10. The PageUp, PageDown, and up and down arrow keys can be used to scroll through the list.
To clear all of the stocks off
of your ticker and start anew, you can type the ~CLEAR
SelectNet Orders Page F6
This page lets you view the
last few SelectNet orders. Canceled or expired orders are listed
in red, pending orders in white, orders executed on SelectNet
are green, and orders that were executed on Island
are yellow. A pair of blinking pink down arrows tell you that
there are more orders below the bottom of the screen. Press the
end or down arrow key to view the new orders.
If you wish to cancel a pending
SelectNet order, use the up or down arrow keys to select the pending
order, and then press the "\" key. This key is located
above the <Enter> key on most keyboards. You will see
"*" appear next to the order type, and after a few seconds
the white pending order will change to red, indicating the order
has been canceled.
Use the <Alt><Tab>
key to toggle you back and forth between the SelectNet order page
and whichever page you were viewing previously.
Risers and Fallers Page F3
This page lists stocks whose
prices have changed the most for the day. Try not to stay on this
page for very long because it can slow down your Watcher.
Locks Page F4
This page shows stocks whose
inside bid is equal to or above the ask price. Try not to stay
on this page for very long because it can slow down your Watcher.
Report Page F5
This page lets you examine reports
on your trades. Use the up and down arrow keys to select the report
you want to view (you can only view your own reports). Press
F5 again to read the report. The up and down arrow, PageUp, and
PageDown, Home and End keys can be used to scroll through the
To jump directly to your reports,
you can type "?" followed by your initials and press
enter. For example, typing "?JL" would jump me to the
first report for trader JL. While you are viewing a report, you
can search for a word by typing "?" followed by the
word and pressing enter. For example, while viewing a dialy P&L
report, I could type "?INTC" to jump to the first Intel
trade on the report.
There is also a report called
News". This report has up to the minute information that
you need to know about the Watcher
program, NASDAQ rule changes, and the meaning of life. Read it
Recap Page F7
This will show you your most
recently entered and executed orders. You can scroll using Up
and Down arrows, Page Up & Page Down, or Home and End keys.
Executions are green. To see all the trades in one stock in order,
type ?STOCK and press enter while on page 7.
Message Page F8
This will show the last few
broadcast messages received. We send out broadcast messages to
keep you up to date on late breaking news, like when NASDAQ is
having computer problems that could affect you. When a new message
comes in it will pop up to insure that you see it. Press F8 to
clear the pop-up message window.
News Page F9
This page shows you the latest
headlines that concerned a NASDAQ stock. These headlines are compiled
from several sources. If news appears on a stock for which you
have an open position, you will get a message in the middle area
on your Watcher
screen. The news page will only show you the headline of the story.
Sometimes a news article will
mention a stock, but the stock symbol will not appear in the headline.
So do not be confused if your Watcher
tells you that news came out on a stock, but you do not see the
stock listed on the News Page.
The Five Minute Rule
You can only perform a single SOES order in each stock per side
of the market in a five minute period. If you buy ABCD on SOES,
you must wait 5 minutes before buying it again. You can, however,
sell ABCD on SOES provided that you have not sold it on SOES within
the last five minutes. The Watcher
will not let you enter an order that would violate this rule.
Short Sale Rule
You cannot short sell a stock at or below the bid if the last
bid tick was a downtick. A downtick is defined by NASDAQ as the
condition when the current bid is lower than the previous bid.
The simplest way to tell if you can short sell a stock is to get
a quote on it and look at the bid tick symbol just to the right
of the stock symbol. If it is a down arrow, you cannot short
sell the stock at or below the bid. The red down arrows and green
up arrows in your Ticker window also tell you if the last movement
was a downtick or uptick. A small green "s" in the
bidtick field means that the stock is a NASDAQ "Small Cap"
issue. The short sale rule does not apply to small cap stocks;
you can short them at any time.
Market Maker Exclusion Rule
You cannot enter
a SOES trade in any stock that your brokerage firm makes a market
in. If you try to SOES in one of these stocks, you will get a
message like NOTHING
DONE, [MMID] MAKES IT.
Don't worry, though, most SOES active firms only make a few stocks,
and you probably wouldn't want to trade in them anyway.