Quote from bidmasterx:
Of course there are a lot of politics involved in doing away with the specialists, so the process may be delayed, but it's only a matter of time before they're all gone.
Then why has the more "fair and orderly" exchange moved in the opposite direction, ceding major trading turf to new specialists through AMEX? To this point, it strikes me as the worst "innovation" that's taken place in recent years: In my observation, the AMEX specialists are generally just big and unpredictable enough so they can't be ignored, and just small and unpredictable enough so that they usually can't be effectively traded off of. Sometimes, often on the same stock on the same day, you'll see AMEX quotes at inside market that have no effect - traded right through - and then a few minutes later you'll see AMEX stop or slow down a move just like a "real" Market Maker or Specialist might do - and then just a bit later the AMEX will virtually disappear from the action...
I suppose that someday some or all of the AMEX Specialists or the markets they're involved with might "mature," maybe after enough traders take to bypassing them, but at present many AMEX Specialists appear to be exploiting their position, using the 30-second rule either to fill orders at bad prices in fast markets or to hold them, then back away or cross them. If anyone has come up with a useful way for a small trader to use AMEX, I'd love to hear about it: The best I've come up with are some theories that don't really suit my style of trading (e.g., in theory, you might sometimes get an execution off or around some AMEX quote that's obviously behind the market, but I've not yet managed to do it or even to try it).
Throw in the forced closure of Island book on ETFs, and there's a good argument for starting an open boycott of AMEX, by the way. I also wonder if they'll find a way to make the same thing, or something like it, happen on the Nasdaq stocks they're into...
Eventually, if ARCA's initiatives take off and if the proportion of other ECN action in NYSE stocks increases, NYSE traders may find themselves increasingly have to deal with similar complications.
I guess it's just part of the ecology of the markets: There is a tendency to rationalize trading with new technologies, but anyone with enough capital and enough connections is still probably going to carve out a niche based on whatever inefficiencies they can exploit or, where possible, create. No matter how computerized and auto-executable a market gets, the bigger players are going to find ways to turn it right back into the opposite, at least temporarily. They've got their ways in the e-minis, too.
