Re: NYSE Tradethrough report.
What a self serving, skewed report this thing is.
The gap that McSweeney is so piously pointing out exists solely BECAUSE of the trade through rule. Eliminate that rule, in six months time (or less) there will be no gap. If liquidity on NYSE stocks appears on the alternative markets with fast and sure execution, poof, there goes the NYSE specialist advantage.
from the report:
"If a buyer or seller of a stock had his or her order routed to trade at the second-best price, then
this would add an average cost of 4.21 cents per share to the transaction. This additional
transaction cost on public-customer orders would go to the dealer or trader who had
quoted a worse price but nevertheless received and executed the order, while the most competitively
priced orders are ignored."
What a freaking lie. With an ECN trade, the 4.21 cents difference goes to the trader on the OTHER SIDE OF THE TRADE. This may very well be a trader representing Ma and Pa Kettle who McSweeny professes to have such concern about.
In any case, I would love to have ONLY 4.21 cents slippage on trades I am trying to close out when the specialist is holding my order.
REMEMBER, price improvement for one party is price disimprovement for another. And that other party will sure as heck NEVER be the specialist.
And, I just love his table showing the difference between the NYSE prices and alternative site pricing. What the NYSE folks will never show is a chart showing the average FIRM bid/ask spread on NYSE stocks and stocks of similar volume on NASDAQ. Remember, the QUOTE on NYSE means squat, it is what you actually get filled at that matters.
Re: The tables in figures 2 and 4.
OK, so institutions have a harder time moving size without the connivance of the specialist system. Let the jackasses become better traders. It is a legitimate question as to WHY there is that trading cost difference. Must be those darn daytraders that are hanging around the NASDAQ.
Increased volitility is not, by itself, a bad thing for the investor. Again, I am of the opinion the average fund trader is probably not that good of a trader, and gets eaten alive if forced to trade a truly open market. I could be wrong, just basing my thought on what I read here and elsewhere.
I would hasten to add that I suspect that the lower volitility and spreads did not necessarily equate to a better trade profit for the ultimate customer, the aforementioned Ma and Pa Kettle.
And one final thought. High liquidity is, I would think, a good thing for Ma and Pa Kettle.
). Most listed traders can tell very easily vs. OTC traders that aren't familiar with the way the listed market works. Also some daytraders don't have good time & sales that allow you to see what happended in NY at a particular time period which is very important to getting a price adjustment to see what the market was like in the past. Most daytrading software is made for OTC traders therefore it's kind of hard to look at the time & sales. Also some people don't have a time and sales too, so this helps them too. Hope you liked it. It' a really great tool considering it's free and real time.