ISE's "Complete PMM List": Adirondack Electronic Markets LLC (Bin 3) Banc of America Securities LLC (Bin 6) Bear, Stearns & Co. Inc. (Bin 5) Deutsche Banc Alex. Brown Inc. (Bin 9) Knight Financial Products LLC (Bin 1) Morgan Stanley & Co. Incorporated (Bins 8, 10) SLK-Hull Derivatives LLC (Bin 2) Timber Hill LLC (Bins 4, 7) While QQQ, and only QQQ, belongs to BIN11. Who chairs BIN11? ISE's press release on QQQ's listing said Hull Derivatives LLC will operate as its PMM. Anybody to clarify the BIN11?
Def & Don, what you don't seem to realize is that those notable companies that you are speaking of - Timber, BearHunter, Knight, Hull, Wolve, CTC etc. have their main trading operations on the floor. In fact, most of the people market making on the ISE came from the floor. I've seen the ISE in action. I've seen the liquidity hole when there is adverse news and I've seen brokers and traders upset when they try to trade on their market and are unable. I've tried to trade on it in several different issues and have been disgusted with it. You can quote As previously stated, for most of the people on this board the ISE will satisfy. For professionals however, the liquidity is lacking. Sure, you got filled on a 60 lot. A 5,000 lot traded in my pit this afternoon on the offer. Think your ISE will do that? Right... I made the mistake of thinking that this was a professional trading board. Instead, this is a gripe session for small traders and owners of daytrading companies who whine about the exchanges and how they were ripped off. Why was your experience on the AMEX so bad Don. What happened? Did you get filled and then the stock ran the other way and now you think you were had. Maybe you believe that the traders in the pit were in collusion with the specialist to screw you out of your order. As for having the support of notables, at least know what you're talking about before throwing names around to sound intelligent. Hull selling to Goldman is old news. The Knight
Perhaps a "mis-read" of my previous post. Please realize that my brother and I spent the better part of 2 decades on various trading floors, and I feel pretty comfortable with all floor traders and their tactics. I am the last one to "whine about exchanges" - I am an ardant fan of the CBOE, the NYSE, and traders on the Regionals. My objection to the AMEX is simply that I don't really care for their "hybrid" Specialist/MM system where they have traders in the crowd who are "given" trades by the Specialist. This is not to say that the system is not viable and liquid, just that I don't prefer it. I support the efforts of the ISE, and Blair and the others who have firms actively trading shows me that there will be (should be) deep and liquid markets. All new things take time to sort out, and the industry is changing quickly...hopefully for the better. We were there when Hull Trading, Timber-Hill, and the others were getting going and we have respect for our collegues. Give the Board a chance....there are good people who post here, and I for one welcome your comments!
Thanks for responding Don, I too agree that electronic markets are the way of the future, but that currently they do not offer the depth and liquidity of the floor. As for the AMEX's specialist system, would I prefer open outcry - YES. That said, as you know all of the exchanges have adopted that system in some form - DPM's on the CBOE, LMM's on PSE, I believe the PHLX is specialist. Trades aren't really "given" - nobody gives you anything in this business, unless it is bad . The scenerio works with the broker entering the crowd, asking for a market which both the specialist and the individual members provide him. If I provide the best market I can take the whole trade, period; The specialist gets nothing. Typically the crowd is running the same sheets, therefore our markets are going to be approximately the same, and the trade will be split up between the members. The problem for me, as a market maker, is that there is a long delay to discern the quantity of my trade, and I need to get my hedge off. The specialist has to trade the book orders first, then he gets to participate equally with the crowd, so if 10,000 traded, 4,000 in the book leaving 6,000 and there are about 10 people on the trade , he'll probably take 1000 and say "5000 out". Now we have to know exactly how many of us are on the trade (and you can guarantee that there are going to be assholes in the crowd who try to slide on bad trades and get in on good trades) and then divide it up. So, if it's ten we get 500 each and now I can hedge (which if I'm last will be horrible). Admitadly, it's not a great system but until something better comes along that's what it is. I wish the ISE were viable. I wish I could set up shop and trade electronically, I'd save about $20,000/mo. in exchange fees and expenses right off the bat. The fact is that it isn't there yet. It's made encouraging advances, I welcome more and I also agree that there are a lot of firms working to improve it. The reason the DPM/specialist systems were originally implemented was to enhance liquidity and provide more orderly, less choppy markets. What's it's done though, is essentially recreate the ISE on the floor. Yes, the locals are there but the specialist/dpm makes the markets and has the capitalization to take the whole trade. In fact, the only trade that the locals are wanted for are marginal/bad trades. You can guarantee that if the trade were a cherry it would have been traded upstairs and wouldn't have even seen the floor. The local's role on the floor is being diminished. Firms don't want to hire traders on a 50/50 deal anymore, they want them to be employees and receive discretionary bonuses, which may be zero even if you've done well because the firm hasn't done well as an entity! Most large trading firms have a trader in every good pit. What's to stop them from leaving the floor and setting up shop upstairs? Any size order is shopped all over the place prior to trading anyway, and the executing broker won't mind making an extra phone call if he thinks that he can get the customer a better fill. The days of the independant local are numbered. Large firms with big assets and team trading, with an active upstairs desk are the way of the future. Given the fixed costs trading on the floor, it is inevitable that electronic trading is the future. I do not believe that the ISE will be the only source of off floor exchange trading however, much as instinet did not remain the only source of off floor equity trading. Our financial system is constantly evolving and in flux. When you consider the advances in Information Technology, it's cost effectiviness and it's reaches, there is no doubt that we are going into an electronic era. We also need to temper our push for the faceless, electronic market with macro financial rule changes that will provide accurate and fair markets and also complement the speed of the electronic age. My suggestions include: Abolision of the 90 second rule (what you see is what you get). Abolision of the up tick rule, in all circumstances - would underwriters have opened internet IPO's at ten times their offering price if they knew their bids would be hit? Options 100 up, liquid equity issues 10,000 up. Multiple listing of listed equities. Reestablishment of the 1,000 up SOES rule (I think keeps everyone honest). I am an advocate of fast, fair, accurate, deep, liquid and inexpensive trading. I want our market system to be improved, and we should take personal responsibility as market professionals to oversea and actively direct those changes. The Knight.
Your opinions are very interesting. You aren't afraid to say what is on your mind. I admire a person like that. I have been trading for several years and I'd like to say that I am impressed. You are very wise. You are also very inspiring. Thank you for your views. I would love to pick your brain. Gwenivere!
Thank you for the complement. I'm open to any questions and will do my best to respond within a few days. As for speaking my mind, why not. There's enough bullshit going on around us without contributing to it... The Knight
The Knight/Gwenivere: Just my $0.02 here, but in the future you might want to double check and make sure who you're posting as, before you make a reply back to yourself. It's more credible that way.
Not a big deal, perhaps just a "dual personality"... (I can barely keep up with one) The comments about the AMEX are valid, and in many ways support my concerns about the system. The time lag for the MM's to hedge off their trades makes for a "second wave" of trading and (IMO) is the reason for the traders moving to Island or NYSE for QQQ's etc.