Specialist manipulation

[mats]

I understand from Hybrid system that from now or from the beginning of 2007 these trade throughs should not happen anymore. So can anybody explain why it still happens that there is for example

ecn bid 10.00
nyse bid 9.97

and trades are at 9.97

Thanks

 

[Bitstream]

u can see it for uself if it is a scare print: just buy the bid and if u get a fill u know u are wrong and get out on the offer @b/e. i do it sometimes cuz it can be real resistance, especially at round numbers.

Quote from e-miNY:

Hey Don, do you agree with the statement that an offer (at least a big one) is 99% bluff? Would a professional seller who thinks prices will go down be offering? Wouldnt they just hit the bid? The reason they are offering is because 1) they are not a aggressive seller (maybe they have already put on half the position). 2) they want to buy it - they bluff some newbie into offering in front of them so they have some supply to buy from.

Is there any more reasons for a big offer?

 

[Don Bright]

Quote from Avid_Consumer:

thanks vm for the info Don. i just don't understand why they would need to do this, who it really benefits. i mean why should one participant in the whole market be able to shut out anyone else even for a second as they attempt to match their orders. they're just one market center.

i guess the question is really about ecn 'interference', what would an example of that be?

it poses a real risk, if one market center has the power to lock out all the others at his discretion. what's to prevent abuse of this power under emergency conditions? i can't think of a rational reason why they should have it in a free market

they can cease my ability to exit a position at any competing mkt center, at will. why can't i shut him out when i feel like it.. they're supposed to add liquidity, not block it

thx again

Having been on the floor for a few years, I can honestly say that you wouldn't want the alternative. If a large order of 100K shares comes in and starts taking out offers in the book willy-nilly, then the stock would bounce all over the place. As traders, we obviously prefer "predictability" vs. "volatility".

Fair and orderly (sort of) is better than wild swings, IMO.

Don

 

[Don Bright]

Quote from mats:

I understand from Hybrid system that from now or from the beginning of 2007 these trade throughs should not happen anymore. So can anybody explain why it still happens that there is for example

ecn bid 10.00
nyse bid 9.97

and trades are at 9.97

Thanks

NMS (National Market System) does not kick in until Feb-May 2007, however orders to NYSE are supposed to be re-routed if there is a better market based on NBBO (National Best Bid Offer).

Don

 

[88888accountant]

Quote from Bitstream:

u can see it for uself if it is a scare print: just buy the bid and if u get a fill u know u are wrong and get out on the offer @b/e. i do it sometimes cuz it can be real resistance, especially at round numbers.

Ha, ive got a way better strategy than that! follow a large offer all the way down on a non shortable downtick stock with 100 shares. When you actually do get those 100 shares short, you realize you and all the other short sellers are screwed and then punch long till the cows come home.

 

[mats]

Thanks Don,
So does it mean that from feb-may 2007 there will be no trade throughs anymore? (if a sell order comes in, first my bid at 10.00 will be hit and after that the nyse bid at 9.97)

suppose next bids are at
9.90 arca
9.90 nyse

which bid will be hit first if a sell order comes in with 9.90 limit

thanks

 

[chrisofj]

Quote from Scalper007:

No way! Trading NYSE stocks is much harder and much more dangerous than Nasdaq for all I know. In nasdaq, you can get in and out easily without any interference. In Nyse you got the specialist spreading up and down all over the place; crossing the markets preventing you from executing on the ecns; and here's what happened to me in my effort to test hybrid stocks such as MA the past couple of days: I buy it at 84 and the stock is trading around 84 on nyse AND the ecn, and guess what..All of a sudden the pervert comes in with a bid of 83.60 and an ask of 83.63 crossing the ecns even though there are bids on the book...Thats an immediate 40 cent loss out of no where. This kind of nonsense never happens in nasdaq. Yes, stocks fall 40 cents in seconds, but it falls through all the bids. It doesn't just jump from 84 to 83.60 when there are bids!! Nyse is a BIG BIG mess. And maybe the hybrid isn't just what I thought it to be. Did anyone else see this nonsense in MA? I seem like the only one who sees this.... I mean if this is what hybrid is supposed to be then nyse traders are in for a big surprise.. I am beginning to wonder if the hybrid system's immediate fill has any value when the fills are just totally nasty.

I agree with this, for me I want to be able to know I can get out where I want no matter what.

I also am familiar with some nasdaq tricks, like a lot of those .40 drops in nsadaq are flushes and if they flush down thru obvious stops ending with just a few fills right at some whole number support (or rinsing those below whole number stops), most of the time if you keep your cool it will fade back to near the range. This is different than blowing a stop fwiw, this is knowing the behavior of stocks and markets. Look at ERTS 11/3/06 in the middle of the day. I love that.

On that note, maybe if I spent years trading only NYSE I would be able to make those NYSE games work for me, but, I ain't going to bother. I just figure this mess in NYSE is the end game of these dudes ability to make money the way they used to.

 

[Scalper007]

I actually did think that hybrid will get rid of all these specialist games. But they are from being gone because they can still artificially control the market in the name of LRP(Liquidity replinishment points). From what I see, no matter where the market price is for the stock, the spec can come in with his LRPs at any price he deems reasonable and just blocks the market off at those levels by refreshing his bids and offers... In the past, the spec would spread only his BID down if he felt the stock was going down or whatever, but his OFFER remained at the current levels and you can try and get out on the ecn. But now he brings both the bid and the offer down to a specific price and completely shuts you off from other market venues and your only out is his LRP price or you can wait till all his LRP shares are gone as he keeps refreshing. On the contrary, you rarely ever see market makers on nasdaq crossing the best bid or offer.

My main point is that nyse is not exactly the same as nasdaq because of the LRP. So there is no rush for all the nasdaq traders to come rushing into nyse. Yes you get filled immediately, but can you get out at a reasonable price is the challenge. Of course if you are not scalping, all this would seem nitty witty but for scalpers every little thing matters.

Again I'm speaking from my experience in MA only, maybe others have different experience with hybrid stocks. Feel free to disagree.

 

[Scalper007]

Quote from Don Bright:

Pretty hard for a Specialist to manipulate much (especially these days). They cannot initiate a downtick, cannot initiate an uptick, and can only participate with other orders except when making a fair and orderly market.

That being said, the automated programs that are triggered do seem to have that ability, but these from hedge funds and other program traders.

IMO,

Don

What about those huge sizes that the specialist flashes and just when you wanna hit it, he removes it. So thats not the specialist? It's a program? I see this often in lvs and x...If the specialist is doing that, Isn't that manipulation?

 

[Option Trader]

Quote from Scalper007:

What about those huge sizes that the specialist flashes and just when you wanna hit it, he removes it. So thats not the specialist? It's a program? I see this often in lvs and x...If the specialist is doing that, Isn't that manipulation?

I sure hope to hear some feedback on this one.