SpecialistMan - by John Bogle

Quote from Tea:

Lot of buzz on the specialist system on CNBC and WSJ today.

They even had a little poll on it

http://moneycentral.msn.com/content/CNBCTV/Promos/P63356.asp

A guy named "Don" called in-support of the specialist system. Hmmmm wonder if that call was from Las Vegas? :D

I think SEC Donaldson is going to be the road block on change. He doesn't seem like he wants to piss off his weekend friends the specialists and floor brokers. They might shun him at the country club. :D
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Not me...I'm too busy on Elite Trader
LOL

They had another guy just on from Fidelity who is supporting the Specialist system explaining that it simply the size of the Fidelity orders that he gets concerned about. If they tell the Specialist 50,000 shares, the Specialist may think 1 million shares.

Heck, we can do that on RediReserve...

Don
 
Quote from Don Bright:



They had another guy just on from Fidelity who is supporting the Specialist system explaining that it simply the size of the Fidelity orders that he gets concerned about. If they tell the Specialist 50,000 shares, the Specialist may think 1 million shares.

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Looks like even mightly Fidelity is scared of these guys.

(hey, there are no new icons on this page. I was going to select the "red face" at being wrong that the caller was Don B.) :D
 
Quote from Don Bright:



Not me...I'm too busy on Elite Trader
LOL

They had another guy just on from Fidelity who is supporting the Specialist system explaining that it simply the size of the Fidelity orders that he gets concerned about. If they tell the Specialist 50,000 shares, the Specialist may think 1 million shares.

Heck, we can do that on RediReserve...

Don
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i saw that guy also..you sure he was from fidelity...i thought he was someone else? Dick McSherry of Elkins McSherry???
 
Quote from C Robinson:



i saw that guy also..you sure he was from fidelity...i thought he was someone else? Dick McSherry of Elkins McSherry???
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You may be correct, I have CNBC as part of the peripheral vision (and hearng). His point made some sense however.

I just meant with the AMEX about their adding the NAZ stocks for opening only and MOC's and as soon as I get an "OK' from them, I'll post some scoop. I wouldn't say "RIP" yet to any Specialist system yet, that's for sure.

Don
 
Excerpt from a NY Times article. Read the last part how they gamed their system in order to screw customers:

__________________________________________________

Big Board Plans Fines for Specialists

By FLOYD NORRIS and LANDON THOMAS Jr.

"The New York Stock Exchange has decided to fine its five largest floor-trading firms about $150 million for trading in ways that deprived investors of the best price they could have received.

The decision to bring disciplinary actions against the firms is to be announced today by the exchange, according to people briefed on meetings with the specialist firms. The firms were told of the proposed penalties in meetings this week, the people said last night.

The firms involved are the largest specialist firms, whose duties are to make markets in the stocks that are traded on the stock exchange.

Specialists are supposed to take positions in trades only when necessary to assure an orderly market. But an investigation by the exchange discovered that all the major firms had failed in some circumstances to match customer orders to buy and sell, according to these people.

Instead, the specialist would buy shares from those who wanted to sell and turn around and sell them to those who wanted to buy, pocketing a small spread between the prices."


"It appears that at least some of the violations stemmed from a feature of a Big Board trading system that is used by the specialists, according to people briefed on the investigation. When a specialist puts a terminal in "send" mode to make a trade, trades coming in electronically from customers could pile up for a few seconds and then arrive simultaneously.

Confronted with several trades, the specialist had a "negative duty" to not trade himself and instead to pair customer orders as possible.

But had the trades arrived one after another, the specialist would have been free to execute each one, with the specialist taking the other side of each trade and profiting from the spread between the bid price and the asked price. It is possible that specialists thought that regulators would not be able to tell that was not the case."
 
The fines are a signal that the issue will be whitewashed and closed soon. It is the NYSE's attempt to pre-empt further scrutiny and maintain the status quo.

Bad news.
 
Read the above a bit more carefully. The Big Board is being accoused of doing what the OTC market always does. Buying from sellers, then turning around and selling from buyers. Pretty funny, first someone complains that the Specialists don't trade, then complain because they do trade.

However, I agree whole-heartedely that orders should be "matched up" whenever possible and in a timely fashion.

Let's hope they keep working to make things better....get rid of the bad apples!

Don
 
Quote from Don Bright:

Read the above a bit more carefully. The Big Board is being accoused of doing what the OTC market always does. Buying from sellers, then turning around and selling from buyers. Pretty funny, first someone complains that the Specialists don't trade, then complain because they do trade.

However, I agree whole-heartedely that orders should be "matched up" whenever possible and in a timely fashion.

Let's hope they keep working to make things better....get rid of the bad apples!

Don
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The thing is Don, the NYSE imposed their rules on themselves and used them to justify their antiquated open outcry system, time delay and wider bid-ask spread.

Then they treated their own rules as though they were toilet paper.

You can't have it both ways!
 
Quote from Tea:



The thing is Don, the NYSE imposed their rules on themselves and used them to justify their antiquated open outcry system, time delay and wider bid-ask spread.

Then they treated their own rules as though they were toilet paper.

You can't have it both ways!
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I'm really not diagreeing with you at all. I know we (as exchange members and traders) need to start keeping a tighter rein on all the activities of the Specialist Firms. My only concern is "what alternative do we have?" The MM system has always failed miserably. The ECN"s are being sucked back into SuperMontage.....and who's running that?

Ideally, we can have a centralized marketplace, where orders can be matched, markets improved upon based on supply and demand, and (this is the tough part) ... have a place where someone will take the risk of keeping a fair market open. Of course, in order to take this risk, there must be some reward (not the illegal or immoral type, but some benefits for taking risk).

It's easy for so many to find fault in anything....but, for the most part, I don't see those same people stepping up to the plate and risking their money to help with the solutions.

I hope that the ET'ers aren't so naive as to think that the "Electronic Exchanges" are the answer....heck, how many times have they simply shut donw? How many times do traders get screwed by full points based on electronic trickery (It's insane that ISLD allows for a full 3% pricing error factor without reprocussion).

Let's all work together to make things better, and let's not "polarize" the issue too much.....(there is too much of that already with our political pundits).

Back to you.....

Don:confused:
 
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