NYSE Front-Running needs to be addressed

[Don Bright]

Quote from AAAintheBeltway:

Don,

Without asking you to give away any secrets, I'm curious which stocks you consider tradeable and which you stay away from, and in particular why the preference for <$40 issues. I had just kind of assumed that the lower priced ones attracted more game playing.

Higher priced stocks have wider spreads, and are more susceptible to the much feared "pennying" (although not usually by the Specialist).

I look for S&P stocks, pretty much it....The "real secrets" I keep for my own guys...LOL (gotta have the Bright secret handshake).

Don

 

[murray t turtle]

Quote from Don Bright:

Higher priced stocks have wider spreads, and are more susceptible to the much feared "pennying" (although not usually by the Specialist).

I look for S&P stocks, pretty much it....The "real secrets" I keep for my own guys...LOL (gotta have the Bright secret handshake).

Don

===========================

Don Bright mentioned GE for the readers April 2004 of Technical Analysis of Stocks & Co.

Even more funny , one of the few contexts Don mentioned trading slower.

 

[Don Bright]

Quote from murray t turtle:

===========================

Don Bright mentioned GE for the readers April 2004 of Technical Analysis of Stocks & Co.

Even more funny , one of the few contexts Don mentioned trading slower.

I just re-read the reference to GE, and I said that GE is notorious for "shake outs" (something we all learn to look for), but this is nothing inappropriate...and where did I say anything about "trading slower"....if you simply mean the trading the markets vs. the ECN's gives a slower response for fills....well, of course it does...and since we prefer price vs. speed, we have no problem with that.

If there is another reference, perhaps I missed it.

Thanks for reading the column, feel free to submit questions at any time....send me PM and I can give "preferential treatment."

Don

 

[jem]

Don could you elaborate on what a clerk does. I was on the floor speaking to a specialist for about 20 mins. He was interested in what I did and I was interested in what he did.

I saw his clerk in the background hands flying. I was watching the book on the flat panel. I saw the trades move up an down the book to accommodate all the bids and offers I saw within the levels displayed on the screen and I saw the P&L go up steadily.

I can assure the specialist was not doing any trading. I also so the clerk eventually come over and report to the specialist what he had done.

I do not know exactly what the clerk did but I can say for sure he was filling orders and somehow someway made the P&L for the day moved up no matter whether the price went up or down.

 

[Dustin]

Quote from jem:

I saw his clerk in the background hands flying. I was watching the book on the flat panel. I saw the trades move up an down the book to accommodate all the bids and offers I saw within the levels displayed on the screen and I saw the P&L go up steadily.

Do you remember appx how much he was up? What time of the day was it?

 

[Don Bright]

Quote from jem:

Don could you elaborate on what a clerk does. I was on the floor speaking to a specialist for about 20 mins. He was interested in what I did and I was interested in what he did.

I saw his clerk in the background hands flying. I was watching the book on the flat panel. I saw the trades move up an down the book to accommodate all the bids and offers I saw within the levels displayed on the screen and I saw the P&L go up steadily.

I can assure the specialist was not doing any trading. I also so the clerk eventually come over and report to the specialist what he had done.

I do not know exactly what the clerk did but I can say for sure he was filling orders and somehow someway made the P&L for the day moved up no matter whether the price went up or down.

Good question, and boy are these guys good! They have the responsibility for the proper trading of "immediately executable" orders and for adjusting quotes to reflect "live" bids and offers. When they have an order to sell 1,000 shares at $42.10, and a buy order come in to pay $42.15, they simply click the "complete order" key and execute the trade at the best price, $42.10 in this case.

They are also responsible for keeping the Specialist apprised of market orders and shares needed for proper execution of these orders. They will ask the Specialist "we have 2400 shares excess to buy at market, where do you want print it?" - The Specialist will ask "what is my net position now?" - Clerk will tell him, and then the Specialist will provide the liquidity needed to fill these orders.

You probably saw all this happen, but maybe were not aware of what exactly was going on....they have an almost non-verbal way of communication, minimum discussion at best.

Good question, I will probably send it to TASC for printing.

Don

 

[murray t turtle]

Quote from Don Bright:

I just re-read the reference to GE, and I said that GE is notorious for "shake outs" (something we all learn to look for), but this is nothing inappropriate...and where did I say anything about "trading slower"....if you simply mean the trading the markets vs. the ECN's gives a slower response for fills....well, of course it does...and since we prefer price vs. speed, we have no problem with that.

If there is another reference, perhaps I missed it.

Thanks for reading the column, feel free to submit questions at any time....send me PM and I can give "preferential treatment."

Don

=====
Did NOT mean to nor did I imply ANYthing inappropriate was done or written;
just reread reference & in that context still looks like a slower trade was implied.

Quote '' many new people make the mistake of covering to soon''
On line just before SPY question.

Good read

 

[alanm]

Quote from Don Bright:
[the clerk] will ask the Specialist "we have 2400 shares excess to buy at market, where do you want print it?" - The Specialist will ask "what is my net position now?" - Clerk will tell him, and then the Specialist will provide the liquidity needed to fill these orders

Shouldn't the imbalance first be shown to the crowd, particularly if the spec knows that there are sellers near the inside and/or that the offer being quoted includes limit sell orders in the crowd? If there are buyers at 20.00, sellers at 20.03, and the last sale was a downtick at 20.01, is the spec justified in stepping in front and selling to the guy at 20.02? Does the answer change depending on the spec's current position? Is it different if there are sellers at 20.02 and the spec would have to sell to him at 20.01 (zero-minus tick)?

 

[jem]

I do not want to get too specific because I was on the floor talking with a few specialists as a favor from the specilists to a friend. I will say this, that IBM son of a bitch would not let me anywhere near anything that would give me any information, even though he did talk to me for a few seconds. Smart of him as I traded IBM heavily at the time and was just dying to get any info at all.

For the book that I was watching, it was a stock that traded about 200-300 thousand shares a day. It was the middle of the day and he was up a little more than 10,000.00 I also remember when I did get glimpses of other posts and I tried to get as many as I could, I did not see a single negative number. But the screens that I saw were not all uniform.



I spoke with a lot of guys (clerks and specilists) about trading because they were fascinated by daytraders. They all had stories about guys who went upstairs and lost everthing And they just could not imagine trading without floor information. My friend--- who was a 2 dollar broker or whatever the proper name is for a guy who executes trades for funds is called ---was like when you have big positions you got to call me and I tell you who is standing around and what the feel is. He used floor slang.

I was like if I have a big position I would be out of it by the time you got to the post. It blew him away.

 

[Dustin]

Quote from jem:

I was like if I have a big position I would be out of it by the time you got to the post. It blew him away.

Fun story! How did you get to talk to these guys? I've never been to the NYSE but assume you don't get to close to the specialists on the tours.