specialists cant make money

F

Free Thinker

even specialists are having a hard time making money and they are guaranteed the spread and get to see order flow ahead of time.



LaBranche Guides Lower, Citing Sleepy Stock Markets

By TSC Staff
10/01/2003 08:09 AM EDT


Moribund stock-trading volume will result in LaBranche (LAB:NYSE - commentary - research) missing third-quarter earnings estimates by a wide margin, the company said.

LaBranche, which operates a specialist firm on the New York Stock Exchange, expects to earn 3 cents to 5 cents a share in the quarter. Analysts surveyed by Thomson First Call were forecasting earnings of 17 cents a share for the period.


The company said depressed volume and lower volatility led to the shortfall, particularly as it lowered the need for the company to act as a principal in stock trades. LaBranche said principal trading volume was about $176 billion in the third quarter compared with $247 billion a year earlier and $188 billion in the second quarter of 2003. Principal trading revenue in September were the lowest for any month since October 1999.

LaBranche also said an NYSE investigation into the behavior specialists' trading practices is limited to a "very small fraction" of its trading revenue.

"While LaBranche takes every transaction seriously, it believes that the activity under review is statistically insignificant relative to its trading volumes," the company said. "LaBranche also believes that the distraction caused by the investigation is disproportionate to its scope and looks forward to its resolution."

The shares were recently down 99 cents, or 7%, to $13.16 on the Instinet premarket session.
 
Add to this the fact that they have been ignoring the negative obligation rule (pennying the paper in front of institutional orders). It must really be tough these days.
 
Quote from GATrader:

Add to this the fact that they have been ignoring the negative obligation rule (pennying the paper in front of institutional orders). It must really be tough these days.
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The David Finnerty (Fleet specialist) front running scandal was in April. So, maybe the specialists have been observing the negative obligation for the last quarter out of fear of being in the spotlight.

What they are finding is if they are not allowed to cheat - then they can't make a lot of money. No wonder why they desperately want to keep self-regulation.
 
They implement new ways to chit the public. It seems to be their favorite these day not to update Bid and Ask, print trades below Bid and keep Bid higher for somebody to trigger the buying for example. Actually they change the Bid and Ask as a reflection of what has happened already.
I find this very irritating, stop limit order now is considered by specialist as his supplementary income.
All these things tell me that now they still pennies and candies out of desperation.
 
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