NYSE Front-Running needs to be addressed

[I Missed Boat]

Quote from hayman:

Regardless of whether the market tanks or there is a big selloff in the stock, the buyers out there will get filled first in that scenario. When the buyers are all dried up, the Specialist takes over. At that point, he can set the price he wants, and he can "legally" undershoot the fair market price at the time. This mitigates his risk substantially, since he can subsequently drive the price back to its "market" value after he/she pruchases, and sell for a profit. I've had lengthy discussions with a Specialist acquaintance, and he told me off the record, that this is their most prevalent oppty for profit. The biggest oppty for profit is the major Bad News before the bell scenario. Here, they know apriori the supply/demand imbalance, and can be the last resort buyer at a very favorable price to them. Glad to see that the Specialists are making money at your and my expense.

Yes, before the bell the specialist minimizes risk (as he is expected to do) by trying to get a good price relative to the pile of shares he has to buy. I was referring to moves that occur during the day, such as when institutions decide to suddenly unload. However, if there is really such buying interest in the stock before the bell opens, and the specialist really is indicating below the level of demand, then there should be buyers listed above the indicated price over the ECNs. In this case, the seller can sell to those buyers. Also, if you are long, and you think the spec is opening the stock below the level of demand, then just hold it. If you are short, then hurry up and cover.

Either way, at least you can always fall back on having a spec, especially during the day, provide liquidity and accountability, instead of crooked MMs who back away and cause investors to take, in most cases, inferior prices and stomach crazy volatility (which is also often artificially created too).

 

[Don Bright]

Quote from hayman:

Yeah, but when they bail people out, they get to set the price, and it is usually at a price lower than a market that would be driven just by normal market supply/demand. That's how they make their BIG money. Don't make them out to be such saviors. They may get burned occassionally, but I don't see any Specialist firms losing money, year over year.

"Normal" supply and demand is never the problem...it is the "abnormal" days/times where all the havoc is created. This is when we need some type of "fair and orderly" markets. IMO.

Don

 

[hayman]

Quote from I Missed Boat:

Yes, before the bell the specialist minimizes risk (as he is expected to do) by trying to get a good price relative to the pile of shares he has to buy. I was referring to moves that occur during the day, such as when institutions decide to suddenly unload. However, if there is really such buying interest in the stock before the bell opens, and the specialist really is indicating below the level of demand, then there should be buyers listed above the indicated price over the ECNs. In this case, the seller can sell to those buyers. Also, if you are long, and you think the spec is opening the stock below the level of demand, then just hold it. If you are short, then hurry up and cover.

Either way, at least you can always fall back on having a spec, especially during the day, provide liquidity and accountability, instead of crooked MMs who back away and cause investors to take, in most cases, inferior prices and stomach crazy volatility (which is also often artificially created too).

Hey, I never said that love MM's. As a matter of fact, I rarely trade NASDAQ any more, although Supermontage has been an equitable success, IMO. But, that doesn't mean I can't be critical of the exchange I trade in. I think there is a load of room for improvement. I think you are over-emphasizing the Specialist's value of importance and providing fairness into the marketplace, but I respect your opinions.

 

[hayman]

Quote from Don Bright:

"Normal" supply and demand is never the problem...it is the "abnormal" days/times where all the havoc is created. This is when we need some type of "fair and orderly" markets. IMO.

Don

Don,

I agree, but it is during the abnormal markets, when they "earn" their money. Creation of havoc equates to profits for the Specialists, 9 times out of 10. Granted there are sometimes when they get "caught", but do you know any trader who is right 100% of the time ??? I really think that Specialists (and their firms) feel that they are owed an advantage for this "risk" that they can be saddled with. Again, when was the last time the Big 7 showed a loss year-over-year ? I rest my case.......

 

[Don Bright]

I, for one, do not want to see my capitalist system have "losing firms" at the exchange....

I don't think we disagree in philosophy...they do "earn" their money during times of havoc...

Don

 

[Nordic]

Quote from hayman:

I've had lengthy discussions with a Specialist acquaintance, and he told me off the record, that this is their most prevalent oppty for profit. The biggest oppty for profit is the major Bad News before the bell scenario. Here, they know apriori the supply/demand imbalance, and can be the last resort buyer at a very favorable price to them. Glad to see that the Specialists are making money at your and my expense. [/B]

These are great plays! Major Bad & Good news on any liquid stock. The key is to know when the spec starts buying or shorting. Riding his/her prints is the key.

 

[shaq48]

hayman,
i have personally seen the p/l sheets for variuos posts and they do lose money...just not on the thinner stocks. you just can't seem to deal with the fact that the specialist can be the big fish in the pond during the day. I gather you don' trade the thicker stocks because you are not close to being the big fish, but somehow you feel that you entitled to an advantage because you trade the thinner stocks with some size. if you want to make the specialist pay just ramp up your size and be bigger than the specialist...your not in the crowd so he won't be able to see you coming with your huge orders and stick it to him.

 

[MR.NBBO]

Quote from shaq48:

hayman,
i have personally seen the p/l sheets for variuos posts and they do lose money...just not on the thinner stocks. you just can't seem to deal with the fact that the specialist can be the big fish in the pond during the day. I gather you don' trade the thicker stocks because you are not close to being the big fish, but somehow you feel that you entitled to an advantage because you trade the thinner stocks with some size. if you want to make the specialist pay just ramp up your size and be bigger than the specialist...your not in the crowd so he won't be able to see you coming with your huge orders and stick it to him.

Thank you shaq48, I guess your handle is your idol, followed by your IQ.

In thin markets the specialist holds all the cards, especially if you think you can be "bigger than the specialist" and win. He only lets you fill when he decides....it's his post your trading at.

 

[Don Bright]

Quote from MR.NBBO:

Thank you shaq48, I guess your handle is your idol, followed by your IQ.

In thin markets the specialist holds all the cards, especially if you think you can be "bigger than the specialist" and win. He only lets you fill when he decides....it's his post your trading at.

OK you guys...there is no need for getting argumentative... remember, the Specialist does have some advantages, and he has some responsibilities, and he has many restrictions. He / She is not going to risk their nice job just to screw you or another trader out of a couple thousand shares....that's just common sense. They probably won't try to screw the big orders either, if not for propriety, for fear of getting caught. Yes, some are better than others...I have parked my butt right in a few specialist posts in my life, and I see hard working people trying to keep up with the activity.

They're part of the game....and in some cases you just want to be on ths side of the specialist...and if you think he's making money, then you have a better chance of making money as well (when you're on his side).

"Know the rules...play the game...do your best....work to eliminate the bad apples"...

Don

 

[hayman]

Quote from MR.NBBO:

Thank you shaq48, I guess your handle is your idol, followed by your IQ.

In thin markets the specialist holds all the cards, especially if you think you can be "bigger than the specialist" and win. He only lets you fill when he decides....it's his post your trading at.

Agreed, Mr. NBBO !

Shaq, I have a problem with abusing of privileges for self-gain. To be honest, I'd rather see an equitable supply/demand marketplace (eliminating all this pennying crap), and pay a 10% profit fee to the NYSE to support Specialist-like activities during a turbulent market. At least, I'd get what I deserved, and be subsidizing the so-called advantages of the NYSE over Nasdaq. To me, that is a much more prudent idea. Maybe I'll bring it up at the next board meeting..........