ECN rebates versus Fraction Spreads?

Discussion in 'Trading' started by bigscalper, Jul 2, 2002.

  1. bigscalper

    bigscalper Guest

    Doesn't anybody on Wall Street understand that Specialists, Market Makers, and all day traders that add market liquidity on a daily basis need to be compensated for their risk, work and stress.

    I find it extremely funny that Wall Street eliminated fractions to make the spreads tighter for the retail investor and didn't realize the huge mistake they made by doing so. By doing away with a minimum spread of 6 cents and allowing spreads to go as low as 1 cent, many big liquidity providing firms have cut back their businesses. It simply is not worth it for these firms to risk capital for an almost NIL return.

    Now the power that be are trying to increase liquidity and bring back these scalpers by giving them liquidity rebates. This isn't going to work because the only way they can give liquidity rebates is if they charge the retail investor when he takes liquidity. Isn't it funny how the NASDAQs strategy is to become more competitive while at the same time raise it's fees to the retail investor. Here is an example, NASDAQ use to charge 50 cents to use SOES, now they charge $.002 per share, plus a 10 cent order entry fee. Before if you bought 2000 shares you would pay NASDAQ a pass-through fee of 50 cents. Now the same trade costs you $4.10. Does this sound like they are getting more competitive. Guess where your money is going? In the pockets of people adding liquidity in order to get their business back.

    Simply solution.....

    If the NASDAQ wants to make life simplier while at the same time bringing back more liquidity and making themselves more competitive all they have to do is implement a minimum spread of 5 cents!
  2. Once Supermontage arrives July 29,the .10 order entry fee will be gone,just the .002 per share executed will stay,along with the .01 per cancellation fee.