Discussion in 'Wall St. News' started by zu001, Oct 29, 2008.
From the link above.
"The specialists -- who will now be called Designated Market Makers (DMMs) -- traditionally use their advanced look at orders to find an appropriate trading partner, thereby calming volatile markets. They are required to fill all public orders before filling their own."
âThey are required to fill all public orders before filling their own."
May not be the case anymore, from NYSE:
In exchange for these obligations and
restrictions, DMMs will:
â¢ Be entitled to parity with incoming orders,
instead of yielding to public orders on the
NYSE Display Book, as specialists do today.
â¢ Be permitted to integrate their floor-based
trading operations into a related member
firm, subject to strict information barriers.
This will give the DMM better access to
capital, risk-management tools and will
make operations more cost effective.
â¢ No longer be the agent for orders on the
Points of interest/concern
They will no longer be required to fill all public orders before filling their own. Will the time priority size parity still be honored?
Will they still not allowed to initiate an uptick or a downtick?
Will they still be there as a buyer or seller âof last resortâ during large market moves to the capacity they are now, or from now on more latitude in stepping away?
Will there still be price improvements?
And finally, how will the open and closing imbalances be handled? How will the "look ahead" for these situations be handled? And how would that effect the OpenOnly and MOC orders and prints?
That's going to hurt scalpers. If your strategy depends on your order going ahead of the specialist you have been effectively put out of business.
So, I unless I read this incorrectly, the violations for which the specialists were indicted back in 2005 would now be legal.
15 Specialists From Big Board Are Indicted
By JENNY ANDERSON
Published: April 13, 2005
While the Big Board uncovered the original instances of improper trading in this latest case, it failed to follow through, leading to S.E.C. supervision of the investigation. Last year, the S.E.C. brought enforcement actions against seven specialist firms. The firms paid more than $243 million without admitting wrongdoing. The S.E.C. is considering whether to change the self-regulatory model.
Federal regulators say the specialists engaged in two illegal trading schemes: using knowledge of a trade to deal in front of it, and "interpositioning," which occurs when a specialist intervenes in a trade rather than matching buy and sell orders.
You cut out the part that says they will NOT have an advanced look at the flow.