US Equity orders are required to be marked as Buy, Sell or Sell Short. I understand that it is important to mark each order correctly, but I want to discuss how critical it is for every order to be marked correctly. Is this a situation where 95% correctness is acceptable, or does it need to be 99% or 99.9%. In other words, if we send 1M orders a day, is it acceptable for 100 of them to be marked incorrectly (Sell when it is actually Sell Short, or vice versa)? I don’t believe that 100% is possible for anyone sending a high frequency of orders, since it is impossible to know in advance if a given order will fill. For example, if I’m long 100 SPY and I have a sell SPY order outstanding on BATS and NASDAQ, I can’t know how to mark these orders in advance, because I don’t know which will fill. To take another example, if I’m long 100 SPY and I want to sell 200 SPY, do I need to break this into 2 100 lot orders (one marked Sell, the other Sell Short)?So I’m wondering what level of accuracy is normal and required.

Given the SEC's concern with naked shorting, I suspect that marking a Shortsell as a Sell is much worse than marking a Sell as a Shortsell. Whether they would investigate/sanction for transient imbalances is another matter. The key is not to show a consistent pattern of mismarking.

Imagine I'm long 100 and send a sell 100 (which would not be a short sale) that does not fill (it goes resting in the book). Then another trader in the firm sells 100, so now the firm position is zero. If I want to amend the price on my resting sell order, do I need to cancel it and re-enter a new sell 100 that is marked as a short? Or can I just amend the price and make sure all new orders are marked as Short? All of our orders are moving and filling over a period of a few seconds.

This really is a question for a securities lawyer -- someone who understands SEC regulation SHO and updates in the context of your company's standing in the industry. I would assume that if you are net long at end-of-day or the net volume of declared (and executed) short sales equals the net short position, then you are fine. Another solution is to ensure that you have an identified reserve of shares that you can borrow and that the sum total of all open sell or shortsell orders never exceeds your long positions plus reserve levels. Finally, I will be the first to admit (and caution) that what I assume is OK and what the SEC would seek to prosecute may overlap in distressing ways.

QuoteOriginally posted by: HockeyPlayerImagine I'm long 100 and send a sell 100 (which would not be a short sale) that does not fill (it goes resting in the book). Then another trader in the firm sells 100, so now the firm position is zero. If I want to amend the price on my resting sell order, do I need to cancel it and re-enter a new sell 100 that is marked as a short? Or can I just amend the price and make sure all new orders are marked as Short? All of our orders are moving and filling over a period of a few seconds.In an ideal world this should not be a problem. lets say firm is long 100 shares acros 2 books (50 in each). in book trader wants to short 100, so he sells 50 from long and 50 as a short sale. similarly in book 2 trader does the same. as long as you know waht the book position is then it shouldn't be an issue.