NYSE Front-Running needs to be addressed

As you can all see, the Specialist's are under scrutiny and have to pay fines like many of the other "bad guys" out there. I would imagine that there has been quite a bit of internal concerns, and that the bad practices should be cut back considerably now.

The fines and restitution aren't too bad, so I guess the regulators didn't think too much was "stolen"....LOL.

Anyway, let's hope that this makes for much better markets for all of us now.

C.Robinson...I know that the first half hour or so is more of a "do what you will time" on the NYSE, and therefore the most important time of the day.

Remember, there is a difference between "trading in front of customers orders" (the fine issued today), and "pennying"...the first relates to "time" (taking an order out of turn...illegal as I see it), and "making a better market" "Price" ..coming in ahead by a penny or so...improving markets...not illegal as I see it.

Now we still have to worry about it is "pennying" each other....remember, we, as traders, account for a big chunk of the trades taking place....so, be good to each other (yeah, right...LOL).

We do our best to show our traders how to find stocks that are less vulnerable to these practices.

Back to work..

Don
 
Quote from Don Bright:

I would like to put out the following for you all to review, and for commentary:

After reading the above, I wondered what your comments might be about the BOX...the Boston Exchange's option trading system that just started that not only allows, but encourages Price Improvement via their 3 second rule. ?? The electronic trading elite seem to think that this will make for a much better pricing structure, and therefore take liquidity away from the CBOE, AMEX, and the ISE.

www.bostonoptions.com

Back to the original question of price improvement. You might think about the "not held" orders held by brokers. The "market orders" that are held by brokerage firms (for execution at their relative "leisure"). Are not "market orders" simply orders looking for the best price (and most timely)? Yet, no serious trader would use market orders after they understand how the system works.

I noted that decimalization was mentioned as another of the nails in the coffin of the NYSE...is it really better to have a full 6.25 cents "given away free" to the Specialist? Yes, many of us (traders) would love to "go back to the archaic system" of fractions for our own greedy purposes....but is that really "fair" to the public / retail traders who seek better pricing?

There are many "flaws" in the Specialist system, some real, some perceived. Without the "centralized market system" (I suggest) we face a much bigger concern than the potential for being "pennied" by the "Specialist" by those who try to extract money via trading....not to those who are suppesed to be "protected" by the government (the "widows and orphans" and their 401(k) plans, etc. The Electronic system's big (real) flaw is that each and every individual can simply "turn off" their computer and leave the market stranded with no "captain" - and this concern is a real one, we saw it back in 1987 (a lifetime ago to many, but a time when the public was not served well).

Open discussion and debate over how to make changes are certainly the way improve the overall marketplace. I encourage you all to continue to offer alternatives without singular purpose...alternatives that do not favor the few with high speed access to every tick...alternatives that view all sides of the equation, including having to put your own money on the line to make these, taken for granted, "fair and orderly" markets. Surely missing out on a penny or two once in a while, although quite irritating to we (serious) traders, is a small trade off for having a highly efficient place to trade.

Keep the ideas coming....I am in constant contact with those "powers that be" ... and like to carry with me valuable input...and hear the resulting responses.

Don
More...

You are right on this one Don! By the way, I don't know how well you made a case for going to Las Vegas for your class, but it was funny to hear you rip on some of the particular snake oilmen at the trade show (buy on green light, sell on red light)! :D
 
Quote from PoundTheRock:



The bottom line seems to be capital commitment, and I don't think anyone should ever be required to commit their capital -- ever. Hence, specialists are obsolete - we need the volatility anyways.
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I don't think you'd be singing this tune if you made your money primarily from investing, as the vast majority do.
 
Everyone should keep in mind that MMs have been doing a lot of illegal and unjust things as well.

That said, the only problem I really have with the specs is the way they often prevent traders from getting short naturally! That should be cleaned up!
 
Quote from I Missed Boat:

You are right on this one Don! By the way, I don't know how well you made a case for going to Las Vegas for your class, but it was funny to hear you rip on some of the particular snake oilmen at the trade show (buy on green light, sell on red light)! :D
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As you can see, sometimes I just "go with it" - and don't really have a strong "agenda" (to "get" people to L.V.)....We pretty much filled up the next Vegas class anyway...

I have to admit that the shows make for excellent fodder for the "snake oil" expose'. LOL

Glad you enjoyed the show...

Don
 
Quote from I Missed Boat:

Everyone should keep in mind that MMs have been doing a lot of illegal and unjust things as well.

That said, the only problem I really have with the specs is the way they often prevent traders from getting short naturally! That should be cleaned up!
More...

HI..

I assume you would like to eliminate the uptick rule. That might be an answer, but if you really think about it, isn't that counter-intuitive to the "protect the investor" mentality that is growing on Wall Street? As an old options and futures trader myself, I don't distinguish between long and short (for profit purposes), and we have always liked the downward moves better than the rallies (for the obvious reason that the markets go down more quickly than the rise).

It's interesting to read the many varied comments on this board (and other places)...many are in favor of "hanging" everyone (specialists, MM's, firms, exchanges, etc.), and then others want to relax many of the rules aimed at protecting the investors. The investors haven't been very well protected via the MM system, and we see many problems with the NYSE (nothing really new, just more awareness).....my basic conclusion is that the highly opinionated people here are obviously voicing the concerns that affect them directly..."fix my concerns first" ...which is understandable, but in reality, for things to really get done, there has to be viable alternatives to existing practices ...alternatives that don't cause more problems than they fix.

Pre 1929 (my brother's time)...LOL...no uptick rule...was that simple rule the "end all" for fixing the trading problems...I guess they thought so back then....but who really knows.

Let's continue to find alternatives that allow our pursuit of profit and happiness (synonymous?) alive. LOL

Don
 
Quote from Don Bright:

As you can all see, the Specialist's are under scrutiny and have to pay fines like many of the other "bad guys" out there. I would imagine that there has been quite a bit of internal concerns, and that the bad practices should be cut back considerably now.

The fines and restitution aren't too bad, so I guess the regulators didn't think too much was "stolen"....LOL.

Anyway, let's hope that this makes for much better markets for all of us now.

C.Robinson...I know that the first half hour or so is more of a "do what you will time" on the NYSE, and therefore the most important time of the day.

Remember, there is a difference between "trading in front of customers orders" (the fine issued today), and "pennying"...the first relates to "time" (taking an order out of turn...illegal as I see it), and "making a better market" "Price" ..coming in ahead by a penny or so...improving markets...not illegal as I see it.

Now we still have to worry about it is "pennying" each other....remember, we, as traders, account for a big chunk of the trades taking place....so, be good to each other (yeah, right...LOL).

We do our best to show our traders how to find stocks that are less vulnerable to these practices.

Back to work..

Don
More...

===
Yea, Bloomberg reported the 5 Specialist firms paying 245 million in fines this mourning;

might be a bit more internal concern about the related lawsuits in the works.

Some lawyers specialize also.
 
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