NYSE Front-Running needs to be addressed

[Don Bright]

Quote from hayman:

Don, I hope you had your violin handy, and consoled this poor soul. How on earth are the Specialists supposed to cope with behavior like this ?????

Very cute...LOL...

It's funny, some people have the same attitude when they hear about all "these rich stock traders" on Elite Trader and their concerns LOL....

(Serious again)....the people I met with today were very quick to accept responsibility for those "associates" who had mis-deeds.. and the "many" pay the price for the "few."

The exchange is a membership "club" ...not a Government entity, and even the Government doesn't guarntee anyone's success in an arena of professional traders. The retail type traders have their accounts "insured" somewhat, but they face the same risks as anyone else who chooses, yes, chooses, to participate in the wonderful game of trading. All the Nyse vs. naz vs. forex vs. futures etc. aside, we are pretty lucky to be in the fortunate position to have a bad trade once in a while be the "big bad event" of our day....

Yes, let's all work to make a good thing better....

Don

 

[jem]

Don my first question is

why a specialist should ever be allowed to make a price improvement for his own account. I.E. why should he be allowed step in front by a penny. I suggest they should never be allowed to improve for less than a nickel. That would improve things right there.

Next I would ask them what percent of the stocks transactions and what percent of s stocks volume did they trade 5 years ago, and what percent now. After they answer ask them why have the #s in increased. Ask them if this is consitent with more people have direct access.

Ask them what percentage of days do they go home profitable.
Ask them how their profits have been each of the last five years.

Ask them why they ask the penny brokers "you got any behind that". Ask them if that is legal? Ask them what percentage of the time they ask that question on orders of 50,000 or more.

Ask them if they are bonused or get to share in profits in any way based on their profits. Ask them if they get a bonus or a profit participation based on how well they serve the public? How exactly are they paid. And what do they get bonuses for?

Ask them how much money the specilist division of their companies made last year and how was that profit derived. I.E. how much came from making markets.

How often do they go home flat? or hedged?


I sure I could come up with some more.

 

[hayman]

Great questions, jem, but I think you know the answers already.......

 

[Free Thinker]

Quote from Don Bright:

Very cute...LOL...

It's funny, some people have the same attitude when they hear about all "these rich stock traders" on Elite Trader and their concerns LOL....

(Serious again)....the people I met with today were very quick to accept responsibility for those "associates" who had mis-deeds.. and the "many" pay the price for the "few."

The exchange is a membership "club" ...not a Government entity, and even the Government doesn't guarntee anyone's success in an arena of professional traders. The retail type traders have their accounts "insured" somewhat, but they face the same risks as anyone else who chooses, yes, chooses, to participate in the wonderful game of trading. All the Nyse vs. naz vs. forex vs. futures etc. aside, we are pretty lucky to be in the fortunate position to have a bad trade once in a while be the "big bad event" of our day....

Yes, let's all work to make a good thing better....

Don

hey don tell those specialists to stop pennying me when i am trying to penny them. i think they should fill me a penny over the bid whenever i want it.
while your down there thank the UNA specalist for giving me $1 price improvement tuesday morning. dinner on me next time i see him. lol

 

[I Missed Boat]

Quote from vhehn:

hey don tell those specialists to stop pennying me when i am trying to penny them. i think they should fill me a penny over the bid whenever i want it.
while your down there thank the UNA specalist for giving me $1 price improvement tuesday morning. dinner on me next time i see him. lol

Gotta agree (not necessarily about UNA). While there are specialists I wouldn't mind seeing falling over the edge of the subway platform when the 6 train is coming, there are other specs I'd like to buy a rounds of drinks simply for, surprise surprise, being pretty fair!

 

[JMartinez]

Quote from jem:

Don my first question is

why a specialist should ever be allowed to make a price improvement for his own account. I.E. why should he be allowed step in front by a penny. I suggest they should never be allowed to improve for less than a nickel. That would improve things right there.

Next I would ask them what percent of the stocks transactions and what percent of s stocks volume did they trade 5 years ago, and what percent now. After they answer ask them why have the #s in increased. Ask them if this is consitent with more people have direct access.

Ask them what percentage of days do they go home profitable.
Ask them how their profits have been each of the last five years.

Ask them why they ask the penny brokers "you got any behind that". Ask them if that is legal? Ask them what percentage of the time they ask that question on orders of 50,000 or more.

Ask them if they are bonused or get to share in profits in any way based on their profits. Ask them if they get a bonus or a profit participation based on how well they serve the public? How exactly are they paid. And what do they get bonuses for?

Ask them how much money the specilist division of their companies made last year and how was that profit derived. I.E. how much came from making markets.

How often do they go home flat? or hedged?


I sure I could come up with some more.

Do you really have a valid point above?

1. why a specialist should ever be allowed to make a price improvement for his own account. I.E. why should he be allowed step in front by a penny. I suggest they should never be allowed to improve for less than a nickel. That would improve things right there.

What makes you think it is him pennying you? There's a thing called Open Book now?

2. Next I would ask them what percent of the stocks transactions and what percent of s stocks volume did they trade 5 years ago, and what percent now. After they answer ask them why have the #s in increased. Ask them if this is consitent with more people have direct access.

Would it be consistant with that thing called decimals?

3. Ask them what percentage of days do they go home profitable.
Ask them how their profits have been each of the last five years.

Please tell me you work for free?

4. Ask them why they ask the penny brokers "you got any behind that". Ask them if that is legal? Ask them what percentage of the time they ask that question on orders of 50,000 or more.

Would you want to get hit by a train? or better yet, say they didn't say anything and poof,,,,,,,markets react even more volatile. Then you'll really complain ha.

5. Ask them if they are bonused or get to share in profits in any way based on their profits. Ask them if they get a bonus or a profit participation based on how well they serve the public? How exactly are they paid. And what do they get bonuses for?

Go to the above number 3 for you answer about working for free

6. Ask them how much money the specilist division of their companies made last year and how was that profit derived. I.E. how much came from making markets.

Wait, isn't that their job?

7. How often do they go home flat? or hedged?

Would that really matter to you? Do you think the specialist is going to move world markets over night and then penny you on a hundred shares?


Please tell me you were kidding on those questions. YOu had to.

 

[hayman]

Hey Don,

Here's another one for you - ask them why "Price Improvement" occurs at a much higher clip for illiquids (I'm estimating at 60-70 %), than what the NYSE claims on their website for overall "improvement" (slightly over 40%) ? That wouldn't be compensation for profit, would it ??????

We all know the answers, but I can use some of the rebuttal material for my book.

 

[Don Bright]

Quote from hayman:

Hey Don,

Here's another one for you - ask them why "Price Improvement" occurs at a much higher clip for illiquids (I'm estimating at 60-70 %), than what the NYSE claims on their website for overall "improvement" (slightly over 40%) ? That wouldn't be compensation for profit, would it ??????

We all know the answers, but I can use some of the rebuttal material for my book.

The answer, of course, is obvious...No other "players"...

I'm sure you realize the difference in trading illiquid stocks, and how there is more risk and higher likelihood of greater Specialist participation. This is one primary case for Specialist participation. If they didn't, who knows where the stocks would go. Watch BLK for a few days, and then we can discuss how it trades, and I can show you why it is much better for the outside traders when the Speciailist participates.

Do I get a signed copy of the book?

Don

 

[hayman]

Don,

My feeling is that the Specialists' excuse for playing more in the illiquids is just your rationale. The front-running is just rampant in this area, and for no particular reason (IMO), other than to take advantage (personal profits). Cutting in front is a poor excuse for maintaining an orderly market, IMO. Nickels, nickels, nickels !!!!

Yes, you'll get an autographed copy of the book (have to transcribe from brain to paper first). Maybe I can even have an autograph session, when it first comes out, in the NY BT office.

Regards,

Doug

 

[Don Bright]

Quote from hayman:

Don,

My feeling is that the Specialists' excuse for playing more in the illiquid is just your rationale. The front-running is just rampant in this area, and for no particular reason (IMO), other than to take advantage (personal profits). Cutting in front is a poor excuse for maintaining an orderly market, IMO. Nickels, nickels, nickels !!!!

Yes, you'll get an autographed copy of the book (have to transcribe from brain to paper first). Maybe I can even have an autograph session, when it first comes out, in the NY BT office.

Regards,

Doug

What you may not realize is that they have live orders, with much higher limits that they hold for outside traders and firms. More often than not they are buying stock for a trader that he has the fiduciary responsibility for. I saw this exact thing happen a few times on my last visit. If this specialist had your order to buy 20,000 shares of an illiquid stock, with instructions to not pay over 60.25, and the stock is trading around 60.05-60.12 range, he may serve you, the customer better by giving price improvement to both sides.

I also saw "crossing" going on (just like my "old day" on the floor). It went like this. Broker comes in, asks for the market. He's told .02 bid .04 offer....broker says, I have 5,000 to go at .03, and I have 5,000 to buy at .03..."I cross 5,000 at .03" .. thus price improvement, between the market...everyone is happy, and the specialist did not "jump in" at all.

You might only see the 5,000 shares go by, and wonder if you're getting a bad deal or something....but you're not.

This is why I want to help educate people a bit more about how things really work, not just how things "appear" based on the electronic boards.

The NYSe has not done a very good job in showing people the intricacies of the whole system....and this may be cause for some mis-understandings among the traders in the Community.

Thanks for the input, and keep the questions coming...I really think that the more people know, the better they will feel about the "system." And, yes, I admit to the "bad apples" as mentioned on prior posts.

Don