Observations on the NYSE specialist.

[wabrew]

I agree with Mike. I unsubscribed on page 20 something and just clicked on tonight to see what was happening. God Almighty is Right !!!

Maybe I can interject something positive here before I unsubscribe again. Check out the current issue of Business Week (March 6). You will find, on page 70, a story on how the new NYSE CEO, John Thain, plans to revitalize the exchange with the Archipelago deal.

In this article he admits that the NYSE will close the door on the exchange's "private club" structure. He says that he convinced specialist firms (There are only 7 of them) to accept a new trading system that will shrink their roles sharply if not render them obsolete.

The article states there will be three ways to trade. 1) continue to use the specialist, 2) use the NYSE 'new' high speed computers for instant matching, or, 3) send to ArcaEx, which for now will operate separately from NYSE's.

Here is my take - it will not make one bit of difference!

Contrary to most of the posts here, the specialist makes the really big money not by 'stealing' a few nickels and dimes (or $158 million if you measure by the SEC's settlement), but by holding millions of shares long or short because they "know" where the stock is going in the intermediate term. Then, when there are large order imbalances they "stand ready to buy stocks and stop erratic plunges" etc..etc..etc!

I say BS!

Those large order imbalances give them the opportunity to open stocks at whatever level they want to that will give them maximum profits if they are short, or small losses if they are long.

Just my .02

 

[jimrockford]

wabrew,

I hope you will try reading through the entire part of the thread you missed. I think you will find some valuable info interspersed throughout the, well, other stuff.

 

[Hamlet]

Quote from wabrew:
Contrary to most of the posts here, the specialist makes the really big money not by 'stealing' a few nickels and dimes (or $158 million if you measure by the SEC's settlement), but by holding millions of shares long or short because they "know" where the stock is going in the intermediate term. Then, when there are large order imbalances they "stand ready to buy stocks and stop erratic plunges" etc..etc..etc!

I say BS!

Those large order imbalances give them the opportunity to open stocks at whatever level they want to that will give them maximum profits if they are short, or small losses if they are long.

Just my .02

I have been told by a number of people in the know, and I think Don mentioned it here several times as well, that the specialists actually carry very little if any inventory overnight. They are basically daytraders like most here.

 

[Hamlet]

Quote from jimrockford:

wabrew,

I hope you will try reading through the entire part of the thread you missed. I think you will find some valuable info interspersed throughout the, well, other stuff.

Perhaps some impartial, unbiased person could generously take the time to post a summary highlighting that valuable info. It would serve the thread well.

 

[Hamlet]

Quote from kowboy:


When JR, cstu or others have posted what appears to their understanding of the facts which you disagree with, would you do us all the kind favor of responding by specifically correcting the facts as you see it. Mike

As you wish, kowboy. Here it goes, just for you!

Quote from jimrockford:
Dan's order was on the book, but I am suggesting that a floor broker, not on the book, might have jumped in front of him.

The facts as I see them are that a floorbroker cannot jump in front of Dan's order as Rockford stated here today. Dan's order was on the book and was already partially filled. As per Dan, after he got partially filled on his short, another 200k sell order came on the book and was filled ahead of Dan's remaining shares.

Here is Dan's exact post:

Quote from dwl603:

the only thing that I think these guys should be held accountable for is the number of shares they are allowed to steasl at a price level, this gets particularly annoying when you are trying to get short (non sho stocks, the is no way in hell you are getting the shares once the stock starts to move) and more shares get bought at your offer price then what is even showing on the level and he still wont even give you a share, this happens all too often when the stock is right about to take a nosedive and these guys are just flat out stealing when they do this.


Prime example today on F specialist starts filling my short order for 15000 shares I start to get my fill and manage to get 3300 of them and then some other guy slaps 200,000 on the offeer now I keep seeing bids come across into this 200,000 and I think I this is awesome im going to get my shares and have massive size behind me, after this I counted about 40,000 shares coming being bought at this level, the specialist never gave me another share and the stock went down 4 cents immediately after these shares printed. I know that these shares are being bought at this price it is not sell order price imporvement because I can see the bid coming across.

Does anyone know why this happens? or can anyone give any sort of justification to this if the specialist isnt flat out robbing me what is happening???

-Dan

Here was Rockford's response on that day:

Quote from jimrockford:


NYSE rules sometimes give priority to a larger size order, over a smaller size order at the same price, even though the smaller size order arrived first. I suspect this is what happened to Dan (dwl603).

When I pointed out to Rockford that he was mistaken, as I stated above, his thirty page tirade began.

 

[wabrew]

Quote from Hamlet:



I have been told by a number of people in the know, and I think Don mentioned it here several times as well, that the specialists actually carry very little if any inventory overnight. They are basically daytraders like most here.

Wrong! Specalists carry monster positions.

 

[wabrew]

Quote from jimrockford:

wabrew,

I hope you will try reading through the entire part of the thread you missed. I think you will find some valuable info interspersed throughout the, well, other stuff.

I did. And I didn't.

 

[kowboy]

Hamlet,

If the facts are as Dan posted, that he got a partial fill, then after or during his partial fill, the 200k was posted on the offer and prints were going off on the offer at his same price, why did Dan not get a total fill? Since Dan was there first?

Thanks

 

[Hamlet]

Quote from wabrew:

Wrong! Specalists carry monster positions.

I don't think that is correct as far as overnight position go, but I am hopeful to hear other opinions on this.

 

[Hamlet]

Quote from kowboy:

Hamlet,

If the facts are as Dan posted, that he got a partial fill, then after or during his partial fill, the 200k was posted on the offer, why did Dan not get a total fill? Since Dan was there first?

Thanks

This is open to debate, but my immediate statement was that the 200k seller was given priority because he was a long seller while Dan was a short seller.

It is also open to debate it seems, as to whether longs are given or are supposed to be given priority in some or any circumstances. We have had some conflicting opinions on this here. Myself, Rubberbird, and the moderator have stated that they believe it is true, while ctsu said that it is not. My own and Rubberbird's statement's were made based on our own personal experiences of this being the case. It seems the jury is still out, but I expect the truth will come out of this either way (that is, if Rockford does not have his way with censorship).