Actually no, that's not my problem. I don't like the uptick rule but I accept it. What I have a problem with is the specialist artifically stepping down (offering on each print) to prevent people from getting short, and I am often wondering if when people are trying to buy the offer (when the offer is an uptick) and they are getting filled on the bid, whether the specialist is sometimes the one filling them on the bid. That would definitely not be a fair use of price improvement. People getting short play an important role in the market, and have just as much right to be filled as the buyers!
Don, I agree with lots of what you say. All I'm saying is let's line investor's pockets with profits, before Specialist's pockets. The current rules give them an ungodly advantage. Perhaps having them being well-paid salaried employees, as opposed to commission-based is a solution. And let them play with house (NYSE) money, when stabilization is required. After all, they aren't taking it on the chin at all during a sell-off. During sell-off periods, they are ALWAYS the last resort buyer at prices well below the prevailing price. In this scenario, this undershooting of the market price gets done, so that they can drive the price back up and unload for profit. Specialists LOVE sell-offs - this is where they make their huge profits. So, in reality, the service and add-value they provide is weak at best, IMO, for the average trader/investor. During major sell-offs, the investor/trader is NOT getting the best deal.......full automation in the scenario may result in wilder short-term gyrations in price, but overall, I believe the investor/trader would be better off. Gotta get busy, and beat some Specialists .....have a nice day !
Actually, there are days when specialists lose. What if a specialist is already long before terrible news comes out. What about when a stock tanks and hardly retraces because institutions are selling hard. Remember when stocks tanked 20 points with almost no retracement. The specs take risks, and some are very fair about it, and they deserve credit where it is due.
I Missed Boat, Yes, I agree, there are some risks. However, Specialists "see" what's coming a lot earlier than most of us, and can react earlier, and to their advantage. While they do incur some risk, the playing field is heavily tilted in their direction.
Just a comment: They may "see" the orders flying in towards them, which may or may not help them. They have to actually take the time to figure out whether the orders are indicative of something "news worthy" or simply "noise'...and often times, they get stuck with stock from an institution that may "know more" than they do. I agree, they should be able to read the market as well or better than most of us....but at least we don't "have" to trade all the time. Don
Yeah, but when they bail people out, they get to set the price, and it is usually at a price lower than a market that would be driven just by normal market supply/demand. That's how they make their BIG money. Don't make them out to be such saviors. They may get burned occassionally, but I don't see any Specialist firms losing money, year over year.
With all due respect, that doesn't make sense. If there is "normal demand" when the market tanks, then the buyers wanting in will get filled and the seller wanting out will sell to the buyers.
Regardless of whether the market tanks or there is a big selloff in the stock, the buyers out there will get filled first in that scenario. When the buyers are all dried up, the Specialist takes over. At that point, he can set the price he wants, and he can "legally" undershoot the fair market price at the time. This mitigates his risk substantially, since he can subsequently drive the price back to its "market" value after he/she pruchases, and sell for a profit. I've had lengthy discussions with a Specialist acquaintance, and he told me off the record, that this is their most prevalent oppty for profit. The biggest oppty for profit is the major Bad News before the bell scenario. Here, they know apriori the supply/demand imbalance, and can be the last resort buyer at a very favorable price to them. Glad to see that the Specialists are making money at your and my expense.