I’ve got 4 newsletters now!
Check out my awesome free new FAQ service called TIManswers where you can ask me any question whatsoever!
TIMalert subscribers are absolutely loving the new TIMalerts chatroom with nearly 150 people in there every day, all sharing ideas and tips…one of the newbies is “DarthTrader” and he sent me an email the other day warning of some changes being made in the Level 2 feeds of Pink Sheets & OTCBB stocks:
I have some information regarding a change in your data feeds that will affect those of you who rely on your Level 2 montages when trading penny stocks. Personally, I am adamant about having the most reliable and accurate data at my fingertips when trading. Therefore, I run 3 different quote systems from 3 different feed providers in order to quickly identify any glitches that might be coming down the pipeline. Unfortunately, the anomaly that I am about to describe looks the same on most systems that are not already properly set up! So, unless you knew what to look for, you probably missed what has been happening.
Recently, more and more market makers (such as NITE, BMIC, etc) have been pulling away from the OTCBB quotation system (and everyone seems to agree that this trend will continue with even more makers following suit). After speaking with the head of OTCBB trading at Knight and to several other traders at various firms, I have deduced that OTCBB has implemented a new fee structure that the firms find somewhat exorbitant. So, rather than get hit with these giant fees, the firms are no longer quoting through OTCBB.
However, they ARE quoting on a Pink Sheet/OTCBB combo system that is far cheaper. The trick here is that even if your data provider is sending you NASDAQ, NYSE, and OTCBB L2, then you WILL NOT see the entire montage if you do not have the Pink Sheet L2 data feed. Since market makers such as NITE are often the largest players in these small stocks, it is important that you are able to view their quotes. In order to see them, you will need to make sure that your broker or data provider is capable of delivering Pink Sheet Level 2 data and that you have permission to receive this data. This is somewhat confusing, because the stocks for which you want this data might not be on the Pink Sheets at all! So, how do you know if you are already receiving Pink Sheet level 2? Plug in an active OTCBB symbol and look for NITE in your montage. If NITE is there, then you are receiving the Pink L2. If not, then you will need to make the necessary adjustments.
This is a bigger deal for some traders than for others, as some platforms offered by larger firms like Goldman Sachs usually do not offer the Pink Sheet L2 feed at all because their clients are not looking for Pink Sheet stocks. Other traders will find the mild inconvenience of having to pay an additional monthly “exchange fee” in order to receive the data. To recap, without both feeds you will most likely begin to see more and more bulletin board stocks with what appear to be unusually large spreads as more market makers pull out of the OTCBB quote system. So, make sure that you are up-to-speed with your data, watch those spreads tighten back up, and good luck with your trading!
Posted in Adapting, Guest Posts