Nas, Nyse

N

newguy1

I just joined a prop firm. I can only trade NYSE, because there was no capital contribution; its all their money.

Now the rationale I've been given is that NYSE is easier to trade than NAS.

Can anyone give any reasons for this?

New guys are required to flip around volume stocks for a penny. For this, we rely a lot more on reading the prints, OB, and L2, despite the fact that many have mentioned that L2 and OB are greatly deceptive. I've been told that NAS is harder to read.

For people who trade NAS, are you primarily using the charts/TA to make your decisions?

What is the primary difference between trading NYSE and NAS? (order execution, liquidity, volatility?) We can't hold overnight or anything like that, so the difference in swing trading (if there is one) doesn't relate to me.

(btw, I posted a long rant in another thread, and have been pm'ed to reveal what firm I work in. I would do so, except I realize my firm checks this website and probably posts here as well. Also, I've noticed that when people reveal information like this, they often get accused by someone for advertising/being a shill, even if its just a stupid pm. I'm just not going to play that game. )
 
As an example of such a firm, ETG (Brother Hitman's old firm) prefer NYSE...

The basic rationale (or at least what they state to their new traders) is that it is easier to read the specialist (the sole arbiter of orderflow control) than get a read on several exchanges simultaneously (Nasdaq)... an accurate read on immediate orderflow is vital if you are scalping at an R:R of 1:1, as you are...

When I used to primarily trade stocks (particularly pre-decimalization) it was wonderfully easy to eat teenies and eighths all day long on NYSE issues... going for 1 cent targets (a mere sixth of a teenie) is good risk control (trade time expoure) from the perspective of the firm, but is also obviously highly commission-generative, so for both reasons what the firm is asking you to do is beneficial for the firm, since the commissions costs will be deducted before you get paid, and in order to get paid a meaningful amount, you gotta trade like crazy... it doesn't matter to the firm if you only net $1k for the month, but the firm will get pissed if, in the process of netting that $1k for yourself, you haven't also generated them a few thousand $'s in commissions... cos what the firm charges you in commissions is likely to be very different to what your executions cost the firm...

Bottom-line (and assuming 50:50 profit-share and minimal execution costs from the firm's perspective): the firm will value a trader who generates $1k a month in profits and $30k a month in commissions more than a trader who generates $15k a month in profits and $5k a month in commissions... and this model is probably set up to juice you on the commish...
 
follow the money -- they aren't going to put up margin unless they stand to make something by doing so.

Though I've never heard it talked about, I suspect that NYSE is paying for order flow. Any order coming to the specialist electronically is like "found money" to him, because he can either ignore it or penny you 'till you cancel, or he can stuff you with a fill that suits him, certainly if you send it market. The volume makes the exchange look like it's alive and kicking.

Your firm charges you a commish on anything you do, and they get some advantage from the exchange (or the executing member, or both), either a kickback on volume or a wildly favorable transaction rate. They probably self clear, so those costs are at a min for them.

Most props are able to grind out a gross-positive month, which means the house is making it, while you're looking at eviction. Once in while someone really makes money, and once in a while someone really blows out. They hope it balances.

It's a pretty inhumane business model, but it's worked for years.
 
if i was you...i'd ask them what they plan on doing after April 2006 cause everything you learn may be worthless as the NYSE goes electronic ..you dont wanna be wasting your time learning a style that will not exist 8 months from now..unless your cleaning up...then i'd say milk it for what its worth cause its most likely goin away

d
 
I agree. Its hardly the ideal model. But the bottom line is that it probably does both good and bad. I really can't lose that much doing what they ask. I really can't gain that much either. At least not without their approval.

What i've realized is that when theres more to gain, theres often more at risk with respect to prop shops/arcades.

If I walked into an arcade and wanted to do whatever I pleased, I could. The potential to gain would be much higher, say swinging around 100 shares of something that moves, like GS.

At the place I'm at, flipping for pennies, I can only gain so much. The commissh here is pretty low because its by the order, not the fill. When you start throwing around large size, its gets to be a non-issue. The only problem is your buying power largely determines how much you can make....and they only give you so much. Even if you decide to throw down your own cash, your buying power for cheap volume stocks is not determined by your inital equity. You could throw down 20k...but you may only receive 50k in BP for volume stocks until they like you enough. As far as anything else goes, your BP would be at a minimum of 10 times your initial equity.

I don't think its healthy to have a negative opinion of the place you work at, especially as a newb. I've seen the blotters for people that work here, and some folks make a killing just flipping for pennies. I suspect they are allowed to throw around large size. After all, sometimes its hard to get filled on something like LU. I know a newb that throws around 10k...he hopes to make capture 1 cent a day....100 bones...actually more like 90 something after commsih and exchange fees. Somedays are obviously better than others. It seems like for something like LU, getting filled isn't really a matter of share size. Even getting out isn't that big of a deal until you get up to 80k and there isn't enough to actively get out.

Some props are just in it to use you. I think the more dangerous ones are the ones that let you do as you please, without any restrictions. At least here, you are free to do as you please if you throw down your own cash...but until then, you just do as they say. Thats probably a good thing, because if I just did whatever the hell I wanted after reading a book or two, I'd probably get burnt like toast. Then again, I might die by a thousand cuts....
 
Quote from Drock409:

if i was you...i'd ask them what they plan on doing after April 2006 cause everything you learn may be worthless as the NYSE goes electronic ..you dont wanna be wasting your time learning a style that will not exist 8 months from now..unless your cleaning up...then i'd say milk it for what its worth cause its most likely goin away

d
More...


I've been concerned about this style of trading going away. I think its a good base for someone to have because you get pretty handy at order execution and reducing cost via efficient routing.

But can you tell me what effect the NYSE going electronic will have on someone flipping pennies. One of the advantages to doing this is the low commish, and rebates. I've heard that certain ECN's will be charging in the future...and the fact that NYSE is free to add/remove liquidity is nice. I believe this is important to my pnl. If this were to go away, I might be in a jam.
 
the effect of diff ecn pricing on NYSE is exactly like scalpin for pennis on NAS

look at JDSU, SUNW, SIRI

all rebate stocks....try those..if u do well on them..u'll be ok
 
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