Understanding Institutional money flow with U.S. Equities / Dxfeed

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Understanding Institutional money flow with U.S. Equities / Dxfeed

Post by sawtooth500 » Mon May 18, 2020 1:57 am

I'm using Bookmap with Dxfeed and I trade U.S. equities. 

What I really want to understand with bookmap is what is the institutional money doing - is it buying or selling, and what is the retail money doing, buying, or selling? For example, if I can determine that the institutions are buying, but retail money is selling, then that is a great insight into a stock.

So how do institutions transact? Let's say we have XYZ stock, the last price is $10, current bid is $9.99 x 1000 shares and current ask is $10.01 x shares. 

An institution has decided that they want to purchase 1,000,000 shares of XYZ, and obviously they want the best price possible for it. Let's say that VWAP right now is at $10.05 so it would be a good time for the institution to purchase. 

The institution would clearly not simply place a buy market for 1,000,000 shares nor would they place a buy limit $9.99 order for 1,000,000 shares, as with either of these they will likely never get their fill. 

The institution would break up the million shares into many smaller lots, let's say 10,000 share lots. 

1. Do institutions EVER place market orders, meaning they are the aggressors?

2. When institutions place a limit order, do they ever place say a limit buy on the ask, meaning an immediate (but likely partial fill), and hence raising the price? In our example, this would be the institution place a buy 10000 shares limit $10.01 order, meaning they can an immediate fill for 1000 shares (and this would show as a green circle in bookmap indicating the institutional order as the aggressor), and then the new bid is now $10.01 x 9000 shares (assuming that nobody else stepped in to sell to the institution at $10.01)?

3. Or do institutions always place their orders as a limit at the current bid/ask, always letting the price come to them? So in the above example, the institution would buy limit $9.99 for 10,000 shares, meaning the new L2 data would show a bid of 11000 shares at $9.99 (10,000 from the institution and 1,000 already there)?

4. Let's say that the price is decreasing. Does the institution keep buying by placing buy limit orders at lower and lower prices? Or do they just keep the same buy limit price and act as a price floor?

5. Most importantly in this example, what if the price is increasing? Let's say it's 30 min to the close, and the price is trending up. The institution wants to buy the 1,000,000 shares before the close so it better get busy. Will it ever be the aggressor, or will it keep placing buy limit orders and only get filled on pullbacks? If it keeps placing orders on pullbacks only, then we would be able to see this pattern in bookmap. 

I suppose most fundamentally my question is, how often (if ever) does an institution act as the aggressor, vs letting the price action come to a limit order?