Discussion in 'Order Execution' started by jpomerenke, Jan 8, 2003.
does anyone know what the average specialists makes in a year??
This doesn't say what the spec makes, but the spec firms.
I have heard between 300K to 1M+ for the top tier. This is "second hand" information though...
The figure to watch is what % return do they make on their equity. I've heard its around 60%.
Now a wild and crazy hedge fund that takes big risks might make 30-40%.
Perhaps the reward that the specialists make is a bit too rich for the risk that they really take.
i hear from the floor that it's not the 90's for them anymore, either.
This was from a couple years ago, but I heard that a 'good' specialist could make $100k a month in specialist handling fees alone. This is when they charge you an extra penny a share for orders in the market 5 minutes or more.
I had a trader who was a floor specialist since the 70's....back then he handled dupont or georgia pacific ( i can't recall)...it was a well known firm and his exact quote to me was: "from 1972 to 1985 if you bought or sold it i made an 1/8th of a point on every share".....needles to say he retired young.
on the other hand, he also had to make markets if there was none...ie. give up an 1/8th to keep everything orderly.
I think decimalization and the emergence of third markets has crimped their huge profits but the bottom line is they still do very very well.
Sometimes, I wonder how they do it.
I was trading GD the other day (an $80 stock) during the first hour, and it was wandering around a 25 cent range, with a 0.05-0.15 spread for long periods of time, printing a couple hundred now and then. Before decimalization, that range would have been a buck, probably with a 0.50 spread.
I'm guessing that they make most of their money at the open and at the close. Kind of like no-limit poker - "hours of boredom, punctuated by moments of terror".
you are correct....as this one former specialist once told me.."it was like printing f#ing money every day!!"
but with the decimals it's a much tighter spread, BUT they are not starving...remember this: In 1970's and 1980's volume on the entire exchange for a particular stock is probably traded in a day now....I remember one old timer telling me that MSFT volume today exceeded the TOTAL volume of the EXCHANGE in 1970 something.....think about it: would you want 1/8th on 100,000 shares or 1 cent on 50 million shares?
with ECNs being able to trade (and price improve) listed spreads, there's no reason - no #@#!$ reason - why anyone with sufficient capital couldn't be an off-floor specialist. you can make 1/8 point for every share traded as well, provided you know when to cut losses and all that other crap that goes with being a good trader....
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