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Observations on the NYSE specialist.
- Thread starter oliver777
- Start date
You keep laying all of this on the specialist, still refusing to understand that there are other forces at work, like floor brokers and market orders, and that the NYSE quote is, by its very nature, delayed and inaccurate by the time its disseminated. Expecting it to be anything else is just naive. There's not necessarily anything sinister about this - it's the nature of a manually entered and updated quote. There are many more traders and MMs in the average liquid Naz-100 stock than there are in X. If you want a correct comparison, talk about GE, IBM, or other liquid Dow components, where there is great participation on the ECNs as well as the floor.
But again, if you're buying a breakout at the same time a million other people are, you're going to get slippage - I don't care which market you're on. There has to be someone on the other side of those trades. If you want to buy something that's obviously going to rip upward 0.50, they're going to lose 0.50 by selling it to you. Who do you think should be willing to do that? Some great benevolent magical liquidity God?
BTW, NYSE quotes are plenty firm for me - I get probably 80% of my fills via NX at the inside quote in about a second when I want it, mostly because I'm not buying or selling when there is a flood of other buyers or sellers, but trading based on other factors.
But again, if you're buying a breakout at the same time a million other people are, you're going to get slippage - I don't care which market you're on. There has to be someone on the other side of those trades. If you want to buy something that's obviously going to rip upward 0.50, they're going to lose 0.50 by selling it to you. Who do you think should be willing to do that? Some great benevolent magical liquidity God?
BTW, NYSE quotes are plenty firm for me - I get probably 80% of my fills via NX at the inside quote in about a second when I want it, mostly because I'm not buying or selling when there is a flood of other buyers or sellers, but trading based on other factors.
Quote from oliver777:
I observed something today that confirmed my beliefs on how the specialist outright block traders from getting into stocks that are prepared to make a move.
While viewing the NYSE Open Book, the specialist routinely shows 1 (100 shares) on the size for the ask and then prints 30-40 cents up, I observed this 6 times today from 10-11am, I'm sure it happened more, but that's how many stocks I can look at the same time.
I was also observing several tech stocks on the Nasdaq and noticed no such thing, allowing traders to enter (although it was a fast moving market, the opportunity was still there to enter.
I can't wait till the specialist are gone from their role in the NYSE and make for a fairer playing field, hopefully this will happen when the Arch merger goes through.
As they say "be careful what you wish for" - since our traders make a great deal of money participating in these "trade throughs" we hope that it continues...since we are taking risks by providing liquidity (outside enveloping), and we need to make money to continue to make this playing field flatter, it only makes sense to continue. Understanding how to take advantage helps get rid of the "conspiracy theory" aspect to either market.
If we have "perfect, electronic markets" then there will be no edge, and we might have to get (yuk) jobs....LOL.
The nasdaq market makers make their money by using the order flow...and knowing the price limits of their "customers" - Specialists make money by simply being a traffic' cop...most would prefer not to trade at all.
Anyway, I've been invited to a discussion by one of the NYSE floor governor's and GS big whig, to discuss the new hybrid system in some detail...and I'll let everyone know how things work out.
All the best,
Don
Dear Don,Quote from Don Bright:
If we have "perfect, electronic markets" then there will be no edge, and we might have to get (yuk) jobs....LOL.
Anyway, I've been invited to a discussion by one of the NYSE floor governor's and GS big whig, to discuss the new hybrid system in some detail...and I'll let everyone know how things work out.
When you meet his Highness the Governor of the NYSE floor, please send my best wishes from me and all of my fellow traders and investors who lost their money in creatures like YUM, LPX and X. Long life to the Hybrid, one of the last endangered species in risk of extinction left on the planet.
One thing i notcice among the nyse stocks i trade is that they may appear to have thick levels on the offer for several consecutive levels, but when they begin to rip all these levels magically disappear making it almost impossible to get out due to lack of liquidity. Since this is consistently happening could this be due to the specialist clearing out the offer or perhaps is this daytraders cancelling their offers? Ive been screwed many times in this situation being short only to see my support wall disappear or clear out in one massive print just like that (but more often the wall is pulled).
Quote from bonds:
One thing i notcice among the nyse stocks i trade is that they may appear to have thick levels on the offer for several consecutive levels, but when they begin to rip all these levels magically disappear making it almost impossible to get out due to lack of liquidity. Since this is consistently happening could this be due to the specialist clearing out the offer or perhaps is this daytraders cancelling their offers? Ive been screwed many times in this situation being short only to see my support wall disappear or clear out in one massive print just like that (but more often the wall is pulled).
A lot of these bids and offers are traders enveloping like Don mentioned. When the market rips or that stock gets close to their price, the orders are cancelled and usually moved. This method requires lots of BP for all those outlying orders, and occasionally a news story will get the best of you.
Also, i'm on Don's side with "be careful what you wish for". A perfect market will be a low volatility market, and none of us want that.
I will try to be as polite as possible here. First, back in my initial days on the floor, the commission income from each book was enough to live very comfortably. Gradually, it has become more and more important for the specialist to be able to make money trading. For my time on the floor, you had to be a moron not to be able to make money trading.
Now.. Perhaps the game has changed, my initial thought is that it should be easier to trade with more price points through decimalization. In essence, you can penny people and sell (on the appropriate tick) anytime you want. Clearly though this has led to the regualtory mess that the NYSE is in.
Anyway. It is getting a little tiring reading all the bitching on this site about the evil specialist. For once I would like a complaint from someone who actually has taken the time to learn the rules.. and about the auction market and the differences between that and the dealer market. Maybe your trading would improve.
I have seen one person here, Don with the openings strategy, that has made an attempt to profit by the given market structure.
Here is why 1's are shown on the offer at certain times.
Assume a market order to buy 10M enters the NYSE with no floor brokers at the post... only the specialist. assume the market is
54.45 for 10M and 5M at 54.5
also 1M at 54.51
2M at 54.53
1M at 54.57
Prior to the order the qoute is .45 by .5 10Mx5M
Clearly 5M will trade at 54.5 and the order has 5M more to buy. As part of the second "auction" 5M has to be priced so the market becomes 54.5 for 5M 100 at 54.6.
Yes, there is supply on the book lower but the specialist needs to show a "firm" quote" so they really are putting up a temporary, worst case price where one side will be filled. They will then print the order at one price lets say 54.6 with the specialist selling 1m. Got it. All the orders, left to the specialist on the book above 54.5 got price improvement which is great and a benefit for having the darn thing on the book. Why have an order on a book if 5 different prints go on and the stock gets walked up to the same price?
Now realize if the specialist is held to a firm quote they can't put up 4M on the offer (that which is offered up to that price) because if another buyer comes in, they too would be entitled to 4M. So 100 is the offer. If another buyer comes in 5M trades and then 100.
Anyway, skillset and sytem makes it imperative that I am familiar with the rules, others can ignore or try to learn, but why bitch?
Now.. Perhaps the game has changed, my initial thought is that it should be easier to trade with more price points through decimalization. In essence, you can penny people and sell (on the appropriate tick) anytime you want. Clearly though this has led to the regualtory mess that the NYSE is in.
Anyway. It is getting a little tiring reading all the bitching on this site about the evil specialist. For once I would like a complaint from someone who actually has taken the time to learn the rules.. and about the auction market and the differences between that and the dealer market. Maybe your trading would improve.
I have seen one person here, Don with the openings strategy, that has made an attempt to profit by the given market structure.
Here is why 1's are shown on the offer at certain times.
Assume a market order to buy 10M enters the NYSE with no floor brokers at the post... only the specialist. assume the market is
54.45 for 10M and 5M at 54.5
also 1M at 54.51
2M at 54.53
1M at 54.57
Prior to the order the qoute is .45 by .5 10Mx5M
Clearly 5M will trade at 54.5 and the order has 5M more to buy. As part of the second "auction" 5M has to be priced so the market becomes 54.5 for 5M 100 at 54.6.
Yes, there is supply on the book lower but the specialist needs to show a "firm" quote" so they really are putting up a temporary, worst case price where one side will be filled. They will then print the order at one price lets say 54.6 with the specialist selling 1m. Got it. All the orders, left to the specialist on the book above 54.5 got price improvement which is great and a benefit for having the darn thing on the book. Why have an order on a book if 5 different prints go on and the stock gets walked up to the same price?
Now realize if the specialist is held to a firm quote they can't put up 4M on the offer (that which is offered up to that price) because if another buyer comes in, they too would be entitled to 4M. So 100 is the offer. If another buyer comes in 5M trades and then 100.
Anyway, skillset and sytem makes it imperative that I am familiar with the rules, others can ignore or try to learn, but why bitch?
I have attached a daily chart on F today. Shortly after 1:30, just after the stock had come from the 8.39/.40 level it looked like it was basing at the .36/37 level. B4 I entered my buy order at 8.36 i watched the ECN C (I think that is ARCA) enter and remove bids at 8.36 more that 10 times in a 30 second period. During this time the NYSE bid was slowly being hit. I thought "what the hell" the selling has stopped since C continued to re-enter a bid (I think it was for 27000 shares) and I entered my order. I got filled right away and the stock sold down to 8.34, then 8.31 and came back later. I do not know what the total volume was, but at 1:30 it was already more than 9 million shares.Quote from dwl603:
dont mean to sound the same way cause everytime I say this too myself I feel like an a****** but got take a look at Ford lately if you get the picture perfect situation there is no way in hell you are getting those shares, I have seen the specialist on that stock eat 3 times what is on the level without giving away a single share I can not wait until these crooks get put out of business, some of these guys are flat out thieves.
If you look at the daily chart - it looks very orderly to me.
The point is this - there are too many players, many which you do not see on level II, that are all working a stock like Ford. I can not believe that the specialist really has any control over the short term - sure, they know more than anyone else, but not enough to make a difference to anyone trading less that 100,000 shares.
Attachments
This thread was started as an observation of actual events drawn from observation (this is not a bitch session or an anti-specialist rant), just an observation. If some are upset by sharing the experiences of our trading, tough luck thats the real world of trading and if the specialist is responsible for unfair practices on stocks that trade on the NYSE, then why is it so bad to share with fellow traders who all have apparently have similar experiences.
Ford might be a bad example because it is extremely thick, as are the 30 dow stocks, however the thousands that are not part of the dow 30, i.e. X, MT, TIE, CLX, CL, all of which trade millions of shares (so plenty of liquidity) there is no smooth flow through, disappearance of size on the open book, flashing huge size on the bid or ask and miraculously disappearing. To me this seems blatantly deceptive and I'm not sure why anyone accepts this as fair.
Please remember these are just observations and nothing else, my experience from trading NYSE stocks has ceased and hence will only trade on the fairer Nasdaq markets.
Ford might be a bad example because it is extremely thick, as are the 30 dow stocks, however the thousands that are not part of the dow 30, i.e. X, MT, TIE, CLX, CL, all of which trade millions of shares (so plenty of liquidity) there is no smooth flow through, disappearance of size on the open book, flashing huge size on the bid or ask and miraculously disappearing. To me this seems blatantly deceptive and I'm not sure why anyone accepts this as fair.
Please remember these are just observations and nothing else, my experience from trading NYSE stocks has ceased and hence will only trade on the fairer Nasdaq markets.