yes one of the books about the 1987 crash indeed implied that the crash was (at least partially) caused because certain market makers/specialist did not do their jobs (providing quotes and market) and this stopped futures/arbitrage, because indices could not be calculated
axeman, Believe it or not the NYSE specialist actually has rules he must follow. I was a specialist clerk , in my younger days and one of my family members was a NYSE specialist. The specialist is monitored by NYSE stockwatch to make sure he/she makes a fair market. Generally the NYSE specialist can only Buy stock on a minus- or 0- tick and sell on a Plus+ or 0+ tick. This means the NYSE stock specialist can only buy when the market goes down and sell when the market goes up. These rules help prevent the specialist from unfairly manipulating the stock. If the specialist wants to liquidate a position on a minus tick(when the stock is trending lower), he can only sell part of his postion(on a 0 minus tick-with a floor officials permission) and then he must participate on the next sale. There are many other rules in place to protect the public. The .01 spreads are the biggest concern for traders now, since the specialist can "better" the market and jump ahead of the public. I think if spreads were wider(say .05), it would be harder for the specialist to "jump" ahead of traders. The specialist as a dealer , has a big advantage, since he sees all the order flow. However, many Specialists now are not making what they used to in a "bear" market and the cost of running a Specialist firm is high. There are no "free" rides on wall street. Gene Weissman E-Brokerage, LLC gene@ebrk.com
I really admire people when they talk about Money they are even ready to go to Congress May I remind you that if you were as careful for your Constitution than for this, this would not happen because it has to do with your Constitution (not by itself I mean the guys who abuse from its misinterpretation)
Gene, If what you said is true, why did it take "stockwatch" so long to arrest the Fleet specialist and take him off the floor? The Fleet specialist was blatantly committing fraud and the NYSE acted only when they received serious complaints. You think the NYSE would of taken him off the floor on their own? Probabably would of taken another few months, years, decades, whatever. - BMW
I would also like to hear what specific rules prevent a specialist from handing out 100 shares and stepping off 50 cents until the crash is over? If they are really required to buy on the way down, how about some REAL buying? peace axeman
axeman, Good point. The "rules" and reality are two different things. That's way many traders now trade NYSE stocks on ECN's. When the NYSE stocks are in a "fast" market, I have had 1000 share orders held much longer than they should be. The reason for this could be system problems or just the specialist clerks getting "bogged" down. Systems have improved since I was a specialist clerk. I would suggest trying ECN's for NYSE orders, if speed of execution, not potential price improvement is your main concern. Gene Weissman E-Brokerage, LLC gene@ebrk.com
bmwstox , There is a conflict of interest in many peoples minds when the "dealer" is also handling public orders and trades for his own account. I would just say that nothing is usually as bad as it appears or as good as it seems. If the NYSE specialist gives bad executions, holds orders or rips off the public(in their minds), the NYSE will continue to lose market share. The NYSE does monitor trading and will prosecute individuals that violate rules and regulations. As a trader, I'm on your side and when I feel I have not got a fair execution, I will not go back to that market and try alternative markets like ECN's. For large orders, I feel the NYSE gives a fair execution most of the time. Gene Weissman E-Broekrage, LLC gene@ebrk.com