Back in the days part 43. Before evil HFT traders, you had evil Block traders.

Discussion in 'Wall St. News' started by KINGOFSHORTS, Apr 8, 2010.

  1. block trade&pg=761,5699177

    You will get a laugh out of this old article. It sounds like the same stuff you hear about how HFT trading is hurting investors, but replace HFT with the term "Block Trade"

    The problem back then was NYSE Specialists working the auction market were not accustomed to dealing with such big blocks of stock. They mainly handled the smaller lot trades that were ordered in by individual investors.

    Since Specialists were tasked with making an orderly market, they had to take these big orders in which put them at significant risk. Forcing them to dump this stuff as fast as possible which would in turn cause huge price swings and such orders back then were not so easy to disperse which caused big price swings.

    NYSE did not like the big institutions, they preferred it the old ways with individuals trading smaller lots.

    OF course a "Third market" formed, with firms like Weeden and Co, Disdained by Goldman Sachs :) (due to non fixed commissions and better service to institutional traders when it comes to handling big block trades)

    But thats for another week.

    About a year later Instinet, the beginning of electronic trading is formed. DEC systems and ASR-33s :)
  2. Yikers, just for the heck of it, I followed up on automatic sprinkler to check the current share price. I've given up, the history will make you dizzy. :D
  3. Heh, good point! I never thought that the IBs were a 3rd market for block trades who would then split them up and sell them on the public exchange.
  4. You can thank Gerald Tsai and Fred Mates later on as well for the big block insanity.

    "Whats that on the tape, Tsai is selling!! go go" "Tsai is buying!!"


    During the 87 crash though you had Block Desks not answering calls, and some folks trying to get on to instinet to unload stuff (if they were a customer)
  5. Sheesh,

    Block trades are the "bread and butter" of specialists. They work blocks in and............they work blocks out. Piecemeal. Ideally without disturbing the price. Inventory management, acquired wholesale and distributed retail. Treated no different than eggs or fish. Have for over a century. And thee "market" has been predominatly institutional since about 1970.

    Other than occasional other NYSE "ax's", specialists are the only ones capable of handling 50,000 share or more blocks. Pretty much makes them "the only game in town".

    Furthermore, negotiated blocks don't have to appear on tape.......unless "they" so choose. Hence, LARGE blocks on tape are propoganda for the desired response (in a rigged game). To shakeout inventory create demand.

    Today, statistics suggest easily 70% of the volume is institutional ; a portion of which is black box program trading. Another, often larger portion, is the slow moving prey of mutual funds, pensions, insurance companies etc.

    Incidently, all of the aforementioned deal

    Mister Keeng of Shorts, a sharp intra-day move down is the specialist racing to cover his own short with minimal public participation. As a by-product he's also cleaning out hard stops to pick up long inventory. Gosh, guess what he's gonna do next?

    Those hard stops aren't blocks. However, they can be bundled to form blocks.

    Institnet? LOL

    Gerry Tsai??????? That's 40 year old news. Is he even still alive? Is his portrait hanging on a Boston wall under soft track lighting? His methods, fast and slow moving averages, is archaic by today's standards. (Although there's something to be said for KSS)

    Pssst, who was Tsai trading against???? Double pssst, it wasn't Joe Sixpack from Peoria.

    All in all, YOU'VE got too much time on your hands. I'm being kind.
  6. Reminiscent of the CDS desks at investment banks not answering calls in 07-08. What is it with these scum?