Class Action Lawsuit against NYSE Specialists

I've traded 500 million shares or so on Nyse in the past few years and here are my thoughts on the issues raised:

1) Read the NYSE rule book. It's long and a lot of it isn't relevant, but you stand a better chance in any dispute if you can quote a rule. For example, with respect to updating markets, a Specialist is required to update his market within 30 seconds--but the rule even states that this can't be used to justify waiting 30 seconds if the Specialist could do it sooner. Of course, there is an "out" for unusual market conditions.

2) Complain if you get screwed on a fill. If you don't like the answer and have a case that you should win under the rules, ask for a governor's or floor officials' ruling. If the Specialist loses the ruling, it figures into his quarterly Exchange performance evaluation. Specialists don't like losing these rulings. Other things factor into his performance evaluation, such as not opening a stock by 9:45am, etc, etc, ad infinitum, There are numerous cases of a stock being taken away from a Specialist for poor performance. Do a search on NYSE's website. I found several cases.

3) Forget the lawsuit. You won't win. What are you going to sue for? Not following Exchange rules? A "general tendency toward screwing me?" Besides, you have most likely already agreed to arbitrate.
Remember, NYSE is owned by its members. They even own the quotes( They don't have to give you these unless they want to and you are willing to pay for them.) I really don't see a case.I haven't heard a good legal theory on this yet, but I'm certainly willing to listen.

4) I bitch all day long at the Specialists, but more often than not, they help me with price improvement, gaps, etc.

Finally, I suggest you ask your clearing firm to get you on the floor at a Specialist post sometime. These guys are often making a market in 4-6 stocks at one time. And, I'm not talking about 4-6 completely dead stocks. Go see how it works. I think you'll come away with a newfound respect (or at least appreciation) for the job.
 
Originally posted by lescor


I'm always trying different stocks to find the guys who will fill you fairly and let you in and out easily. That's the most important thing to me.
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lescor,

Have you found any? If you have, would you mind sharing some of them?

Thanks
 
Originally posted by TraderJimR



I have traded exclusively NYSE for many years and agree with you 100%. While I have made a lot of money, I don't think one day goes by without me feeling like I got mugged by the specialists. I've had days where I make loads of cash and leave pissed beyond belief because of some of the shi* the specialists pulled.

I'll tell you what bothers me the most is when you have a bid or offer in there for sometimes 5 or 10 minutes on a stock and they never show it. So many times I have a bid in on a relatively thinner stock that could be as much as 10-cents above the current bid, but the prick never shows me there. At those times I feel that if I were shown, it might entice someone to sell to me or NX me but now they sit on their hands because the bid is so low. One example out of hundreds of specialist-screw-job scenarios encountered daily.

I do not ever want the specialists to go away, because I am horrible at the Nasdaq game, but if we could make them clean up their act I would be able to make probably 50% more than I do now.
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I like your post, and I know the feeling of having a good day and feeling dissatisfied because you were taken. I know it well.

I think that if they 'cleaned up their act' they wouldn't be making the kind of money they like to make.

On the other hand, they always seem to come up with a new angle. NX is a great example. I'm betting that the majority of shares that are sent NX wind up on the book owing to the arcane nx rules. This is an order flow machine for the boyz.

Everything touted as 'good for the investor' or 'good for the public' or 'good for the markets' is really probably just 'good for the members.'
 
Originally posted by praetorian2
Yeah, making money of the spec is easy most of the time. Nitro, just use a limit order under 800 shares that's on a bid/offer. You'll nx him instantly. For some reason, IB doesn't believe in 1k nx orders. 800 and under and it works.
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Praetorian2,

I don't understand nx real well. I trade MWD and MER almost everyday with TWS. I typically enter my positions 200 shares at a time. I typically enter limit orders to hit the bid or take out the offer, but the only time I get instant fills is when Timerhill fills me. In your experience, should I be getting instant fills from NYSE? I am considering adding a couple of more listed stocks to my regulars, maybe I will have better luck with the new ones. Thanks for any help.
 
On something more liquid like that, you probably wont get fills on NX, as he'll hold you for price improvement. I personally don't like NX b/c you can't get price improvements. On something that trades under 500k a day, you can use NX and it will work well.
 
General comment: Former SEC chairman Arthur Levitt made it his mission to help create a more "fair and equitable" market for the individual investor, and he made much progress during his tenure, oftentimes against great opposition. I think that his goal should be continued, and so I wonder if it would be possible for the specialists to make a good (even very good) living while also playing fewer games and creating a more level playing field for all investors and traders. Is this possible? I suspect it is. As many of you have pointed out in this thread, one can learn how to play along with the specialist, but it's a very costly education, and for small investors, prohibitively expensive. Many of you on ET are very professional, and that's great, but Mr. Levitt's goal was to make investing in stocks less of an insiders club and more available to average Americans. Towards that goal, it would seem to be advantageous to tighten the rules (or just enforce them) so that anyone can get decent fills without having to spend months (or longer) studying the trading patterns of the specialists for any stock you want to trade. I serously doubt that this would put the specialists out of business, but if that were a concern, the rules could be amended to protect the specialists as well, much as the SOES rules were amended after the "bandits" started taking too much money from the market makers on the Nasdaq.
 
I can't speak for anyone else, but for every job I ever had there was a ration of crap that went along with it. So I picked the job(market) with the ration of crap that I am willing to put up with and attempt to make the best of it.:)
 
O please you sound like those scum bag lawyers who want to sue the fast food industry because people who eat fast food get fat.
 
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