Rebate Trading/Certain Prop Firms Reliance on It

A

Ace_Rothstein

Read a couple posts on here about how the SEC is going to seek to end the rebate trading/liquidity game. Wondering how this is going to affect some of the weaker prop firms, namely the ones that rely heavily on rebate trading to generate massive volume and commissions for the firm. Possibly this hit to a firm's volume numbers will raise their clearing rate, narrowing the gap between the bargain-basement-might-be-folding-tomorrow shops and the legit ones. Or the hit to revenues might push them further towards the brink of insovency.

Furthermore this could affect everyone as the lower volume from rebate-monkeys will ultimately cause the SEC to have to raise the SEC fees (section 31 fees). (Unless of course the rebate traders find another strategy that generates the same volume numbers, which I'd say is VERY VERY doubtful.)

Opinions?

Ace.
 
Quote from Ace_Rothstein:

Read a couple posts on here about how the SEC is going to seek to end the rebate trading/liquidity game. Wondering how this is going to affect some of the weaker prop firms, namely the ones that rely heavily on rebate trading to generate massive volume and commissions for the firm. Possibly this hit to a firm's volume numbers will raise their clearing rate, narrowing the gap between the bargain-basement-might-be-folding-tomorrow shops and the legit ones. Or the hit to revenues might push them further towards the brink of insolvency.

Furthermore this could affect everyone as the lower volume from rebate-monkeys will ultimately cause the SEC to have to raise the SEC fees (section 31 fees). (Unless of course the rebate traders find another strategy that generates the same volume numbers, which I'd say is VERY VERY doubtful.)

Opinions?

Ace.
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This, too, will go away in my opinion...kinda silly. When Harvey Houtkin came to my office and traded 500,000 shares in an hour or so....to show me how great it was....(and it was great...for him)...the firms make the money, the traders take the risk... and it is all so silly...

Real traders don't bother with such nonsense....real trading firms shouldn't rely on such "flash in the pan" type of "questionable legality" type things, IMO.

A Canadian firm got fined big time for trying to exploit the game, and probably deservedly so....

It's so much easier to simply learn how to trade properly, use the right tools, and forget all the "scam tactics"....again, IMHO.... Like the old "Soes Bandits" nonsense....

Don
 
I agree with Don. Rebate trading (and I use "trading" very loosely) is a joke.

I know the Canadian firm of which Don speaks and it will make me very happy when I learn of their demise. Not only is their business model unsound they are also the most unethical people on the face of the earth.

Bye bye S.T.! That's what happens when you know not of the business your in.
 
Quote from WannabeTrader27:

I agree with Don. Rebate trading (and I use "trading" very loosely) is a joke.

I know the Canadian firm of which Don speaks and it will make me very happy when I learn of their demise. Not only is their business model unsound they are also the most unethical people on the face of the earth.

Bye bye S.T.! That's what happens when you know not of the business your in.
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I just wanted to add that "adding liquidity" (a good thing that our people do on the NYSE) is not the same thing as the connotation referenced here....

Just to clarify an email...

Don
 
Quote from Don Bright:

This, too, will go away in my opinion...kinda silly. When Harvey Houtkin came to my office and traded 500,000 shares in an hour or so....to show me how great it was....(and it was great...for him)...the firms make the money, the traders take the risk... and it is all so silly...

Real traders don't bother with such nonsense....real trading firms shouldn't rely on such "flash in the pan" type of "questionable legality" type things, IMO.

A Canadian firm got fined big time for trying to exploit the game, and probably deservedly so....

It's so much easier to simply learn how to trade properly, use the right tools, and forget all the "scam tactics"....again, IMHO.... Like the old "Soes Bandits" nonsense....

Don
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I find it amazing Don that you would be so quick to dismiss any of kind of trading that your firm isn't involved with.

Some might have said the exact same things about the market opening orders that you are so enthusiastic about - high volume, low firm risk, easy to demonstrate.

I don't trade either strategy but as is with almost ALL stock trading methods they both only work for a small percentage of traders.
 
The name of the game is to make money. I don't rebate trade but definitely see it as a legitimate way of making money. To knock or call it silly is foolish. It is providing liquidity and tightening alot of the spreads out there. I know traders doing very well rebate trading and heard of programs putting up some serious numbers. The opportunity is there so why not take advantage. And the success rate for rebate traders is extremely high; much easier to learn how to trade properly???????????
 
Quote from Don Bright:

This, too, will go away in my opinion...kinda silly. When Harvey Houtkin came to my office and traded 500,000 shares in an hour or so....to show me how great it was....(and it was great...for him)...the firms make the money, the traders take the risk... and it is all so silly.

Don
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Rebate Trading was great when you had 9 stocks in the NDX under a $1.00 at the end of 01 and early 02. I was a rebate trader making 40-50 k per month. I dont trade for rebates anymore, but when it was good..... it was really good. Its not good anymore, and really hasnt been since the advent of Supermontage. I saw the writing on the wall and new it was time to hang it up.

Lightspeed imploded on the fact that people didnt pay their crazy prices.... and now the ATTN has had to shut down their prop division. http://www.sec.gov/divisions/marketreg/mr-noaction/attain040104.htm , cause the SEC has realized that this type of volume is manipulative and artificial.

But using rebates in conjunction with making P&L is the way I went. I try to add liquidity 40-50 % of the time. Its a disciplined way to bank profits, and a cost effective way of cutting commissions.

Keep in mind the rebate trading game is based on $1 per fill tix. Now that ADSX, RBAK and ICGE are gone. There really isn't much to flip. Those that are rebate trading are trading for P&L and rebates.... not solely rebates. There is too much risk in ORCL and SIRI and stocks like that to truly flip.

I hope this is the last post on rebate trading cause it doesnt exist like it used to anymore !!! Using it to defray cost and help with P&L will exist as long as you can keep the basic NASDAQ stucture of $2 per 1000 to add and $3 per 1000 to take.

Banker
 
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