SEC approves NYSE dark pool. Not good for limit orders.
http://premarketinfo.com/2012/07/05/nyse-joins-the-dark-side/
http://premarketinfo.com/2012/07/05/nyse-joins-the-dark-side/
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NYSE joins the dark-side.
- Thread starter tripledtrader
- Start date
This is an unfortunate response to the prevalence of the wholesaler-B/D payment-for-order-flow deals that eat up virtually all retail order flow.
It's unfortunate because there are real solutions to the problem, such as forcing all client orders into a competitive marketplace (e.g. an exchange), OR forcing B/D's to credit clients with all payment-for-order-flow and/or internalization profits.
The SEC's proposed "Trade At" rule would also push things in the right direction, even if not a complete solution. Of course, "trade at" was attacked by the parties that feed off of these deals, with some pretty goofy arguments that amount to "if we can't skim our clients behind their backs, then we might have to raise prices".
What we're headed towards is an ugly oligopoly dominated by the big firms and hence much larger slippage for everyone but those few big firms, who will receive said slippage as pure profit.
It's unfortunate because there are real solutions to the problem, such as forcing all client orders into a competitive marketplace (e.g. an exchange), OR forcing B/D's to credit clients with all payment-for-order-flow and/or internalization profits.
The SEC's proposed "Trade At" rule would also push things in the right direction, even if not a complete solution. Of course, "trade at" was attacked by the parties that feed off of these deals, with some pretty goofy arguments that amount to "if we can't skim our clients behind their backs, then we might have to raise prices".
What we're headed towards is an ugly oligopoly dominated by the big firms and hence much larger slippage for everyone but those few big firms, who will receive said slippage as pure profit.
Quote from Occam:
This is an unfortunate response to the prevalence of the wholesaler-B/D payment-for-order-flow deals that eat up virtually all retail order flow.
It's unfortunate because there are real solutions to the problem, such as forcing all client orders into a competitive marketplace (e.g. an exchange), OR forcing B/D's to credit clients with all payment-for-order-flow and/or internalization profits.
The SEC's proposed "Trade At" rule would also push things in the right direction, even if not a complete solution. Of course, "trade at" was attacked by the parties that feed off of these deals, with some pretty goofy arguments that amount to "if we can't skim our clients behind their backs, then we might have to raise prices".
What we're headed towards is an ugly oligopoly dominated by the big firms and hence much larger slippage for everyone but those few big firms, who will receive said slippage as pure profit.
Exactly.
SEC obviously feels that we haven't hit a tipping point, otherwise they would address the real issue.
My overall thoughts: The NYSE RLP program will probably not have much of an impact in the way of decreasing marketable retail order flow to the NBBO, as that flow is already diverted (OTC market makers internalize almost 100% of it currently). The program is simply a way for the NYSE to get a piece of the action.
The bigger problem I see here, is that this approval tells me that the SEC sees NO problem with the current market structure, and obviously has no intention of addressing the concerns that internalizers, via stepping in front of displayed liquidity by a fraction of a cent (sub-pennying), are discouraging displayed liquidity. I had hoped that the SEC might follow Canada's lead and make internalizers provide meaningful price improvement over the NBBO. This is obviously not the case.
Bottom line, there is no solution to our sub-pennying issues in the near future.
My overall thoughts: The NYSE RLP program will probably not have much of an impact in the way of decreasing marketable retail order flow to the NBBO, as that flow is already diverted (OTC market makers internalize almost 100% of it currently). The program is simply a way for the NYSE to get a piece of the action.
The bigger problem I see here, is that this approval tells me that the SEC sees NO problem with the current market structure, and obviously has no intention of addressing the concerns that internalizers, via stepping in front of displayed liquidity by a fraction of a cent (sub-pennying), are discouraging displayed liquidity. I had hoped that the SEC might follow Canada's lead and make internalizers provide meaningful price improvement over the NBBO. This is obviously not the case.
Bottom line, there is no solution to our sub-pennying issues in the near future.
Quote from Occam:
It's unfortunate because there are real solutions to the problem, such as forcing all client orders into a competitive marketplace (e.g. an exchange), OR forcing B/D's to credit clients with all payment-for-order-flow and/or internalization profits.
thats the same thing as on the floor when a filling broker would send all his orders to his brother in the pit.
Exactly, this is a throw back to the good ole days when only the market makers saw the order flow!
Quote from jem:
Its odd in the 90s the sec spent all its time promoting the dis integration of markets so as to increase competition and decrease slippage and the last decade has been spent trying bury pricing information and screw the public.
Yep....SOES bandits took it away in 90s...now it's coming full circle, as market makers take the game back.