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Cox should be hanged for X the uptick rule
- Thread starter liulala
- Start date
Quote from Landis82:
Think the ETF "lobby" wasn't having a few meetings with Cox back in 2006 about paving the way for eliminating the "uptick" rule?
Think again. [/B]
i may be a little slow with poor reading skills but why would the ETF "lobby" care about the uptick rule. ETFs where always exempt from the uptick rule.
Quote from Landis82:
It has nothing to do with the point that I made ( and most here on this thread were not able to comprehend because their reading comprehension is so poor ) that the VELOCITY of the market ( not "volatility" ) has gotten to such a heightened degree ( as compared to even electronic trading "age" standards ) that people are unable to cognitively "process" the quotes that they are seeing on their screens, and often think that they may have missed some sort of news announcement that hit the marketplace.
VELOCITY is positively correlated with LIQUIDITY. So you want to reduce the VELOCITY by sucking out liquidity so that trading will slow down enough for your brain to process what's happening?
Quote from Landis82:
If you want to trade commodities, feel free to do so. Commodities do not have shareholders, they do not have board of directors, they do not have employees, and they have nothing to do with an instrument that involves publicly controlled entities.
The public markets don't exist to protect companies from lower stock prices. They were not created to provide employment for boards of directors, employees and officers.
The public markets' sole purpose is to provide liquidity (and thereby reduce transactions costs) and price discovery.
Yes, yes, go ahead and launch into a tirade about how I'm a knuckle-dragging moron, incapable of the deep insights and conspiracy theories you grasp so fully. That's all very helpful.
Quote from Landis82:
I totally disagree.
And yes, I am a professional trader and one who used to be a floor trader in #4 WTC.
The VELOCITY ( not "volatility" ) of price movement in the market has gone to such incredible levels that portfolio managers, traders, etc. are no longer able to humanly "process" the data that they are seeing. Ever seen a market in the electronic "age" drop 200 points in the last 7 minutes of trading before 2007? Ever think that the selling wasn't all from natural sellers? Think the inverse ETF funds benefit from the lack of an "uptick" rule? How about the equity derivative desks at the investment banks that "facilitate" customer orders and trade against the customer?
I'm interested in your point about velocity and these people who are "no longer able to humanly "process" the data that they are seeing". Don't you think this rapid increase in velocity is caused by computers running rapid fire algorithms? If we are dealing with price moves over micro seconds that are hurting the performance abilities of these people, shouldn't they invest in some computers themselves? It seems they are willing joining an unfair battle by pitting their "human process" against computers. This is just evolution in the market place.
Further on that point, please explain how this great velocity in price movement is damaging the markets? Isn't most of the money in the marketplace there to partake in the longer term benefits of investing? What percentage of capital in the market do you think is there to try to profit from millisecond moves measured in cents? If a $50B market cap company loses 5% of it's value in 5 minutes for whatever reason, even if it was solely due to the ability to short without an uptick, please explain how this damages the markets. Either the move is overdone and people will buy the dip, or the move is justified and the market just got there faster. How fair was it back in the day when the specialist would just freeze the book, and do the next print 5% lower with no chance for anyone to trade in between?
And lastly, why do you think the US should have an uptick rule when no other major exchange in the world does, or ever has?
You seem like a pretty knowledgeable guy, I'd really like to hear your reasoning.
Asinine arguments by those defending the uptick rule. I'll summarize and add to the points made by the others.
1. The uptick rule was discriminatory to non-index, non-institutional traders. ETF's and futures allow selling an index downtick and the program buyers of those instruments pledge institutionally held long stock for the de facto shorts on the sell side of the program. It matters little if a stock is hammered merely by virtue of being an index component or if it's "targeted" as an individual issue by aggressive traders. Designated options market makers were also short tick exempt so put buyers were de facto downtick exempt.
2. The rule was easily manipulated on various ECN's.
3. The correlation between volitility..er velocity and a prohibited downtick is spurious. No downtick in Oct '87, eh? Or in 1974. Or in 2000-2002. Was the break in JNPR or CMGI one iota less brutal than BSC? Here's the ultimate irony. You would've lost no higher a percentage of your net worth owning BSC from it's highs than dozens-even hundreds- of tech stocks. JNPR to this day languishes 93% off it's 2000 high.
4. The stuff that caused the financial implosion wasn't even exchange traded. OTC securities are almost always shorted on a downtick. You simultaneously call several dealers, they competitively show you a bid and you hit it. Bada bing you shorted a downtick.
5. The morality of "allowing" long liquidation greater unfettered access to hitting bids is no more an imperative than allowing shorts the same opportunity. What is the next trading action of a maxed out short? To be a buyer. Hell a short interest is the best support you can ask for. If management thinks/KNOWS that shorts have pressed their stock into an ACCUMULATE zone then what does management do? They buy stock and PUNISH the shorts. Think Porsche/VW last month. When management knows their business model is shit and that perceptive shorts are deflating the share price what does management do? Bitch and whine that they couldn't fleece the public with stock sales on the downtick.
6. Get a friggin' clue.
1. The uptick rule was discriminatory to non-index, non-institutional traders. ETF's and futures allow selling an index downtick and the program buyers of those instruments pledge institutionally held long stock for the de facto shorts on the sell side of the program. It matters little if a stock is hammered merely by virtue of being an index component or if it's "targeted" as an individual issue by aggressive traders. Designated options market makers were also short tick exempt so put buyers were de facto downtick exempt.
2. The rule was easily manipulated on various ECN's.
3. The correlation between volitility..er velocity and a prohibited downtick is spurious. No downtick in Oct '87, eh? Or in 1974. Or in 2000-2002. Was the break in JNPR or CMGI one iota less brutal than BSC? Here's the ultimate irony. You would've lost no higher a percentage of your net worth owning BSC from it's highs than dozens-even hundreds- of tech stocks. JNPR to this day languishes 93% off it's 2000 high.
4. The stuff that caused the financial implosion wasn't even exchange traded. OTC securities are almost always shorted on a downtick. You simultaneously call several dealers, they competitively show you a bid and you hit it. Bada bing you shorted a downtick.
5. The morality of "allowing" long liquidation greater unfettered access to hitting bids is no more an imperative than allowing shorts the same opportunity. What is the next trading action of a maxed out short? To be a buyer. Hell a short interest is the best support you can ask for. If management thinks/KNOWS that shorts have pressed their stock into an ACCUMULATE zone then what does management do? They buy stock and PUNISH the shorts. Think Porsche/VW last month. When management knows their business model is shit and that perceptive shorts are deflating the share price what does management do? Bitch and whine that they couldn't fleece the public with stock sales on the downtick.
6. Get a friggin' clue.
Quote from Pa(b)st Prime:
Asinine arguments by those defending the uptick rule. I'll summarize and add to the points made by the others.
1. The uptick rule was discriminatory to non-index, non-institutional traders. ETF's and futures allow selling an index downtick and the program buyers of those instruments pledge institutionally held long stock for the de facto shorts on the sell side of the program. It matters little if a stock is hammered merely by virtue of being an index component or if it's "targeted" as an individual issue by aggressive traders. Designated options market makers were also short tick exempt so put buyers were de facto downtick exempt.
2. The rule was easily manipulated on various ECN's.
3. The correlation between volitility..er velocity and a prohibited downtick is spurious. No downtick in Oct '87, eh? Or in 1974. Or in 2000-2002. Was the break in JNPR or CMGI one iota less brutal than BSC? Here's the ultimate irony. You would've lost no higher a percentage of your net worth owning BSC from it's highs than dozens-even hundreds- of tech stocks. JNPR to this day languishes 93% off it's 2000 high.
Interesting discussion for sure . . . but let me get this straight Pabst:
The connection between VELOCITY and a prohibited down-tick was "spurious" during the October 1987 Crash even though the S&P futures went to incredible discounts that then allowed for stock-index arbs to come in and buy futures while blasting away at bids without an uptick?
Quote from Angrycat:
Good point. The uptick rule also didn't prevent the 1987 crash.
No, but then again stock index arbs didn't need an "uptick" to short baskets of stock while buying the futures as a "hedge". These program trades were relentless during the week of the 1987 Crash due to the oh-so-attractive "discounts" that were occurring on the futures side of the equation due to the panic sentiment in the market place.
This undoubtedly created more Velocity.
P.S. Gotta get back to trading.
Dow now + on the day!
Quote from Landis82:
Are you kidding?
How do you think that an ETF reflects the actual index?
you talking about say a SPY or a Skf?
because im guessing if i own the SPY they are taking ownership of the underlying stocks.
if your speaking of an index such as skf they actually don't directly short the underlying stocks in the ultrashorts.
I disagree 100%. The uptick rule only ads to liquidity. The volatility in the market is due to the lack of liquidity providers, ie specialist and market makers.
Yes there are still market makers and specialist, but they do not take positions, generally.
This was all explained in the interview with Joseph McCandless, former partner and specialist with Wagner Stott, subsequently Bear Wagner.
There was also a clip where Frank Delaney from Bear Wagner, who is now a huge S&P futures trader, where he talks about the fall of the NYSE. His thoughts were that if there is no capital behind a specialist their existence is of no value to the market.
The SEC also banned short selling of the banking stocks in JULY / AUG. The magic hand will determine the price of a company's shares. Supply meets demand at the price.
Yes there are still market makers and specialist, but they do not take positions, generally.
This was all explained in the interview with Joseph McCandless, former partner and specialist with Wagner Stott, subsequently Bear Wagner.
There was also a clip where Frank Delaney from Bear Wagner, who is now a huge S&P futures trader, where he talks about the fall of the NYSE. His thoughts were that if there is no capital behind a specialist their existence is of no value to the market.
The SEC also banned short selling of the banking stocks in JULY / AUG. The magic hand will determine the price of a company's shares. Supply meets demand at the price.