Anyone else concerned by DirectEdge tagging orders as RETAIL?

[Spearhead]

So DirectEdge submitted a proposal to start marking Retail orders as as Retail orders, which the SEC just approved:

http://www.sec.gov/rules/sro/edgx/2014/34-72292.pdf

From the proposal:

"Identifying additional orders as Retail Orders may encourage Members who wish to execute against Retail Orders to send additional Orders to the Exchange, thereby potentially increasing the level of competition around retail executions, resulting in better prices for retail investors."

In other words, retail investors are just bait!

 

[Jack_Larkin]

Sounds like indirectly dragging pay for order flow type setups into lit markets... this actually might be a positive thing if you think about it.

 

[MoreLeverage]

Sounds like indirectly dragging pay for order flow type setups into lit markets... this actually might be a positive thing if you think about it.

Agreed.

 

[vicirek]

And who will check that these are true Retail orders?

It seems like big boys are afraid to trade with each other.

I have a problem with this because they make it official - Us and They and creates inequality in market place.

 

[MoreLeverage]

I have a problem with this because they make it official - Us and They and creates inequality in market place.

What inequality? If you're a retail person and you place a limit order, don't you want people to trade with you? This makes that more likely.

 

[vicirek]

What inequality? If you're a retail person and you place a limit order, don't you want people to trade with you? This makes that more likely.

This shows that posted quotes on the exchanges are only place holders not meant for execution; easy to manipulate and in waiting for unsuspecting passer by.

Out of principle only members of the exchange are allowed to trade. Their "jackets" should be clearly marked at all times. They execute customer orders but order originator/customer class should remain anonymous. Retail order should not be marked as such because it creates room for abuse.

First of all it sends a message to auction participants who have access to this type of information that broker is not interested in internalizing it or indirectly asks please move out of the way so we can execute it etc. which immediately creates opportunities for those in the know.

Do you believe that order marked Retail will get better execution just because it is marked as such? Only after they move the quotation board to take advantage of the poor fellow.

Most importantly I did not see anything indicating that anyone will verify that this is retail order indeed.

This is again one way street on Wall Street.

 

[Jack_Larkin]

This shows that posted quotes on the exchanges are only place holders not meant for execution; easy to manipulate and in waiting for unsuspecting passer by.

You are grossly underestimating how much volume is done by institutional players in the equities market.

(Hint: Retailers are lightweights compared to institutional buy-side.)

 

[vicirek]

You are grossly underestimating how much volume is done by institutional players in the equities market.

(Hint: Retailers are lightweights compared to institutional buy-side.)

Yes, but what is the split on/off the exchange/s, dark pools, order internalizers and the list goes on.

 

[Jack_Larkin]

If you truly believe that you, as a retail trader, have an advantage over your peers... then getting a better fill through this method might be to your benefit.

Think about it. The whole reason pay-for-orderflow exists is because market makers feel retail order flow is safe (and thus, they are more willing to engage that order flow over others.) If you mark yourself as a sheep but are actually a wolf, and the venue is exchange based so no one can tell the difference between you and the droves of over retailers, you might stand to benefit.

 

[vicirek]

If you truly believe that you, as a retail trader, have an advantage over your peers... then getting a better fill through this method might be to your benefit.

Think about it. The whole reason pay-for-orderflow exists is because market makers feel retail order flow is safe (and thus, they are more willing to engage that order flow over others.) If you mark yourself as a sheep but are actually a wolf, and the venue is exchange based so no one can tell the difference between you and the droves of over retailers, you might stand to benefit.

So what you are saying is that SEC for the first time ever did something that will benefit retail.