Trader Types (LOS 44) material, execution, difference

LBriscoe

Reviewing the more obscure material, that could be tested:

What's the difference between (1) "Liquidity at Any Costs" and (2) "Costs are Not Important"?

(1) gets immediate execution, but possibly high market impact because they tip their hand

(2) gets certain execution, paying the market spread... ignores tactics that might be lower cost

So, is (1) and (2) a matter of size? or degree of urgency?

aidebaobao

2) costs are not imp means trader needs execution right now and ready to pay higher (market prices) because he wants to make sure he gets his order executed before everybody knows the information he possessed.

nannan66

Thanks pupdawg, now I can differentiate the 2

thommo77

Now I'm confused.

So I've looked it up. Surprisingly, This this isn't in book 2 which makes a change. I reckon that if they put GIPs in book 1, you could pass with just books 1&2.

Anyway

Liquidity at any cost approach:
Trader believes big 'institutional-size' block orders are the only way to trade. Hence big market impact cost, and everybody goes - look at the size of that trade - I bet he has some information. You know what those information traders are like. Overwhelms market liquidity, hence might have to go to a broker, and gve the game away in the process.

Costs are not important approach:
'Normal' at market orders*. Smaller trades is what this is best for. 'No brianer' typical normal trades for a dealer/broker. Trade costs not even considered.
* To asset a bit of discretion you can use limit orders.