Quote from annaland:
Generally, specialists provide price/time priority, efficient order representation and play an important role in price formations. They also trade against moving prices and provide liquidity when the spread is wide.
No, this isn't true.
Specialists do not provide price/time priority. Your order competes with other orders, in the specialist's public limit order book, on the basis of price/time priority. But exchange rules allow a floor broker to bypass the book, and to step in front of your booked order. Exchange rules create various situations in which a newer order is allowed to step in front of an older order, when at least one of those orders is not in the book. Floor brokers have an advantage over the suckers (you) who are trading without having a physical presence or floor broker at the exchange. Specialists also violate federal securities laws and exchange rules, in such a way as to circumvent price/time priority even when it does apply, and in many other ways, as part of an ongoing criminal enterprise.
NYSE (or AMEX) order representation, and their trading generally, are not efficient. They are exactly the opposite.
Specialists provide liquidity, but they aso interfere with competitors who would otherwise provide liquidity at better prices than do the specialists. Specialists, by interfering with competing liquidity providers, cause spreads to be wide. Specialists, by displaying false quotes, cause spreads to appear to be narrower than they are in reality. The displayed quote is often better than the price you will actually receive if your order executes at the same time the false quote was displayed.
The specialist system burdens the financial system with an unnecessary system of corruption and private taxation, tends to weaken confidence in financial markets, and threatens the foundations of capitalism. The government has been changing its laws in order to reduce the amount of protection and unfair advantage given to specialists by federal securities laws.
