SpecialistMan - by John Bogle

alanm · Oct 20, 2003

It seems to me that the answer would be to have a pilot program in some number of stocks that are scattered across different average volumes and market caps, in which the specialist acts as auctioneer/co-ordinator only, and cannot trade for his own account at all. A second group of stocks could be traded on the ECNs only, and not on the floor at all. The results can then be studied in comparison to similar stocks not in the programs and a determination can be made as to which of them makes sense. Including stocks that report earnings during the test would be a good way to identify the strengths and weaknesses of the different options.

AIG's contention that the specialist should take a longer-term position in the stock seems ridiculous to me. Nobody ever said the spec was supposed to smooth out multi-day fluctuations in a stock - their activity is supposed to be very short-term only (minutes/hours).

The comparisons with the stock markets of other countries or markets for other products don't make a lot of sense, since they are much lower volume or have other different trading characteristics than NYSE stocks.

Personally, I think the answer is to leave the system as it is, and simply enforce the existing rules.

BlueHorseshoe · Oct 20, 2003

Quote from alanm:

The comparisons with the stock markets of other countries or markets for other products don't make a lot of sense, since they are much lower volume or have other different trading characteristics than NYSE stocks.

You might be surprised. There is something universal about the simple act of Buying or Selling.

bent_prop · Oct 20, 2003

With todays proposal to have dual boards with the indepent members guiding the regulatory side and the market reps supporting the floor indicates that the specialists will get another chance. Maybe some type of software would alarm if a Specialist was "frontrunning". (IMO)

spyderman · Oct 20, 2003

check this out, only 1500-2500 trade thurs a day!

http://www.securitiesindustry.com/midweek.cfm?article=927

Don Bright · Oct 20, 2003

Quote from BlueHorseshoe:

Two thoughts: The biggest outcry didn't come from AIG - it came from Fidelity and Vanguard, two very large firms who clearly understand their's and the investing public's interest. I would suggest that this interest is, or should be, paramount to the interests of specialist firms and the prop trading industry. I didn't see that AIG wanted more specialist participation as much as he wanted the specialist firm to hold a larger position of AIG stock as an ongoing policy. AIG was simply trying to drum up another long-term shareholder.

Of course specialists would much rather not trade at all. What you didn't mention is that they would rather not trade but still enjoy their six and seven figure incomes. The problem is that specialists serve no utility and would otherwise generate grossly insufficient profits to justify their wages. They must trade to exist.

Sure, who wouldn't want a nice income.....but they are acting as agents for firms, and their jobs are in the same jeopardy as anyone else's.

As far as Fidelity is concerned, I think they were using this as a PR move to further their hopes of trading within their own ranks (the ol' "bucket shop" approach).... And, I doubt that Fidelity really has the best interest of investors in mind, but I agree that they have their own best interests in mind. If they cared about investors, then they wouldn't allow them to invest in mutual funds with all the ridiculous fees involved. (Boy talk about hypocrisy!!) I'm sure that there are as many "sellers" as "buyers" most of the time within the funds at Fidelity. And if there weren't, then we'd be in big trouble....talk about potential market manipulation (and the 600 pound gorilla!!).

Don

Tea · Oct 20, 2003

Sounds like the solution to this whole problem is to eliminate the time element in the trade-through-rule.

So instead of giving the NYSE 30 seconds to price and complete a transaction - make it first come first served. Then the NYSE will either have to get quicker or fall by the wayside. They will have to reform themselves.

Should be great opportunities ahead for ecn scalpers if this happens.

Century · Oct 20, 2003

Time Test

Don Bright · Oct 20, 2003

Quote from Tea:

Sounds like the solution to this whole problem is to eliminate the time element in the trade-through-rule.

So instead of giving the NYSE 30 seconds to price and complete a transaction - make it first come first served. Then the NYSE will either have to get quicker or fall by the wayside. They will have to reform themselves.

Should be great opportunities ahead for ecn scalpers if this happens.

Actually, it is "first come, first served" based on time priority and time received rules....now if we could just get everyone to synchronize their computers....lol

Don

BlueHorseshoe · Oct 21, 2003

Quote from Don Bright:

As far as Fidelity is concerned, I think they were using this as a PR move to further their hopes of trading within their own ranks (the ol' "bucket shop" approach).... And, I doubt that Fidelity really has the best interest of investors in mind, but I agree that they have their own best interests in mind. If they cared about investors, then they wouldn't allow them to invest in mutual funds with all the ridiculous fees involved. (Boy talk about hypocrisy!!) I'm sure that there are as many "sellers" as "buyers" most of the time within the funds at Fidelity. And if there weren't, then we'd be in big trouble....talk about potential market manipulation (and the 600 pound gorilla!!).

Don

No class ...

Tea · Oct 21, 2003

Time to end the 30-second rule on NYSE

http://www.forbes.com/home_asia/2003/10/15/cz_nw_1015nyse.html