Quote from AAAintheBeltway:
Suddenly it is poor form to complain about the ripoffs on the options exchanges? What difference does it make that some off-floor traders make money? The issue is fairness. Some people made money trading Nasdaq back when they ran a rigged market too, but that didn't make it right.
The bottom line is that money goes where it's treated best. Can anyone honestly say that's at the options exchanges?
It is poor form the way QDZ does it. I wholeheartedly support his efforts to get rid this stuff. I just don't support him. Maybe he has a weird online personality that he express here and is normally a good guy, but he needs a serious attitude adjustment. He has crossed the line from complaining to blaming these rules for his failure. My previous post was to illustrate that whatever the conditions are, one needs to adjust in order to profit.
Another thing about cancel fees, to say there is no cost to the exchange or members is absolutely false. Whether it is electronic or handled by person, there is cost somewhere on every order that goes into the exchange. It costs real money to hire people and buy technology. Now, whether or not it is legal according to SEC rules or good customer relations is a different matter, however, it is entirely fair to try and recoup your costs. So to say," charge for canceling orders even though there are no real costs" is not realistic.
" make orders contingent on the behavior of the underlying security is fundamental to option trading."
Where to begin with this one? If you want this then become an exchange member. I worked on the execution side of the exchange and these orders a big pain in the butt. We sometimes refused these. It is the broker who is refusing this and their aren't many on the floor left who will take them unless it is for size.
"limit competition by prohibiting entering orders on both sides of the market"
I completely agree and should be gotten rid of immediately. The only problem is that these are private organizations. This rule doesn't take money away from you but does take opportunity away. You aren't gonna win on this one. The exchange will respond to any SEC questions by saying the by doing so you are in effect acting as a MM. MM are members and serve a purpose, yadda, yadda, yadda. Rule sucks but you won't get very far with this one.
"stifle innovation by restricting machine order entry without human intervention"
Seems bad on the face of it, but is entirely fair from the perspective that MMs should have certain rights as members, the major one being the right to mass quote. Join the exchange if you want this. If it is a mass execution across the market, it's one thing but to act as a MM off the floor is another. Part of the problem from this stems from the exchanges own stupidity when options went multiply listed. They had the system set up so that it would automatically execute the arb on crossed markets at the CBOE. It was possible to get Raes trade because of an offer on the Pcoast and then buy the same contract back for an 1/8 loss because of a bid on the Amex. It happened a lot in 1999. What pissed me off wasn't the fact sopmebody was doing this, I think the whole thing was brilliant and admire the guy who did it, but the utter lack of action by the exchange to simply turn of the auto-execute system irked me to high heaven. Alas, as good reactionaries do, they over reacted to an extreme.
"allow insiders to break trades which go against them"
I've answered this one already.
"allow market makers/specialists to turn off auto execution at will"
Markets can get disorderly and it is entirely appropriate to slow things down. As a MM, it is not your obligation to lose money but it is to make orderly markets. This benefits everybody involved. You have no idea how good you have it today. I've got war stories from my runner days that would make you cringe. I think it used to be a half hour that an order would have to get filled during a fast market. Can't remember if it was that or 45 minutes.
"allow same to back away from quotes and/or trade ahead of customer orders"
Yea, MMs will try to weasal out of bad trade. So what? Bad customer service is all I see. As far as trading ahead, there are laws governing this and should be enforced. However, don't be pissed if somebody is a step ahead of you.
"Pay for order flow"
Seams kind of cheesy to me. Should it be outlawed? Not in my opinion, if you aren't happy with your executions I suggest finding another broker.
Is any of these illegal per say? No, not really. I did see things which did go on which were illegal. Sometimes the activity was to the benefit of the customer(believe it or not), sometimes it didn't and most often, it was neither. So when QDZ starts whining about this or that, I just think what a loser. It's one thing to complain, we all do, it's just old when that's all he does. These things are minor details in the larger market.
