REMINISCENCES OF A SOES BANDIT

SOES är en förkortning av "Small Order Execution System" och är ett handelssystem på Nasdaq för mindre börsposter på upp till 1000 aktier. Den som lägger högsta/lägsta priset på marknaden står alltid först på tur för att få aktier köpta eller sålda.



SOES was first introduced in December 1988 for 25 stocks. The lack of liquidity after the 1987 market crash led NASDAQ to implement a mandatory system (since June 1988) to provide automatic order execution for individual traders with orders less than or equal to 1000 shares. (For stocks with low volume, it may be less than 200 shares). Market makers must accept SOES orders and so this provides excellent liquidity for smaller investors and traders.

There are several restrictions for those who use SOES, rather than a traditional Electronic Communication Network (ECN), to place their orders.

1. Trades may not be in excess of 1000 shares for a particular stock.

2. SOES does not allow trades in stocks that are trading at prices greater than $250 per share.

3. Once a trader places an order through SOES, they must wait at least 5 minutes to place a trade through SOES on the same stock.

4. Anyone doing more than five trades a day is considered a professional trader, not a retail customer, and can be thrown off SOES (Andy Kessler, "How we got here",Collins Publisher,2005).

5. Institutions and stock brokers are not allowed to place orders for their own accounts through SOES, but they can for a client's account.

6. Market makers must honor their advertised bid/ask prices to SOES orders, provided that they are for the amount that the market maker is looking for.



Initially, when SOES was mandatory, it was met with heavy pessimism from NASDAQ member firms because it forced them to execute all SOES trades that met the market maker's advertised price. There were also significant limitations implemented to prevent day traders from exploiting the system and taking advantage of old prices quoted by market makers.

SOES has revamped the trading market for individual investors. It has given small investors and traders the opportunity to compete on a level playing field with larger investors such as institutions for access to orders and execution.