agree the NYSE should become ecn and not specialist based. good luck getting the specialists out... Originally posted by Ken at DTU Just a note. I have experienced both the NASDAQ system & the Specialist system from the point of view as a Market Maker and trading firm partner. As an AMEX Market Maker in Options , the system is similar to the NYSE specialist system. Since there is a centralized market place , it is easier to monitor a single speclialist to see if he is abiding by the rules. A specialist can only BUY on a -(minus) or (O-) tick and sell on a +(Plus) or (O+) 0 plus tick. This means a specilaist can only buy to support a market or sell on the way up. Rules such as this protect the investor, this is one othe the many reasons the NYSE market was less volatile than NASDAQ market system in many cases. The Specialist of course, can "bend" the rules in some cases to his/her benefit. Some stocks , it can be argued , are so liquid in ECN's that there may be no need for a primary market maker in that stock. I would like to remind everyone in the 1987 crash , that the speclialist system worked. Many NASDAQ Market Makers did not even "pick UP" their phones to execute orders in the 1987 Sell off. I think their are benefits to both market places. I have a feeling in the near future, because of technology and competitiveness, the NYSE will become more of a "hybird" of the NASDAQ system , possibly eliminating the trading floor or many employees like floor reporters & other personal. What that "Hybird" NYSE will become is open to debate. Gene Weissman E-Brokerage, LLC gene@ebrk.com
http://www.nytimes.com/2003/04/27/business/27NYSE.html?pagewanted=2 "We asked them in a survey which market do you feel you get a better execution in," Mr. Eskander said. "Over 85 percent said Nasdaq. If you had asked that question five years ago, it would have been completely the opposite." (small sample size, but still..) login cypherphunk
gaj , I didn't read the NYSE article you spoke about, however I think speed of execution goes to NASDAQ by far. If you trade NYSE stocks and you used to trade NASDAQ, it seems like you are trading in slow motion. You get no price improvement in NASDAQ, only a faster execution. If you a trading size orders, the NYSE might be more liquid for many stocks. The floor brokers in a "crowd" on the NYSE are holding large orders and add depth to the markets . If you would like a faster NYSE execution and the potential for price improvement, try NYSE Direct . NYSE direct , while not a true ECN, will execute small orders in NYSE stocks in 5 seconds or less on the Bid or Asked(most of the time). The NYSE is the primary market for stocks traded there, so if you go away from the exchange on an ECN, you are giving up the potential for price improvement. Gene Weissman E-Brokerage, LLC gene@ebrk.com
Here are some of the highlights from the NYT article mentioned by Gaj: ---------------------------------------------------------------------------------------------------- "There haven't been a lot of innovations from the New York Stock Exchange," said Peter W. Jenkins, head of North American equity trading at Deutsche Asset Management in New York. "Really nothing has changed. They haven't come up with the tools for the institutions to make their process more efficient. There are still so many steps between us and the specialist's post, that we can't execute efficiently." ---------------------------------------------------------------------------------------------------- "I used to detest trading on Nasdaq years ago and always preferred the Big Board," said William Fleckenstein, president of Fleckenstein Capital in Seattle. But he said he had had so many problems with trades on the Big Board that he had come to believe that the specialist system was flawed. "I don't see how having one guy making a market is better than having 50 guys making a market," he said. ---------------------------------------------------------------------------------------------------- Mr. Jenkins of Deutsche Asset Management agreed. "The liquidity in Nasdaq allows us to execute larger size in the big-name stocks more efficiently and quicker. You hit a button and get things done. With the New York, you have to think of strategies to break up your order. It is complicating rather than simplifying." ---------------------------------------------------------------------------------------------------- Specialists simply do not make as much money trading stocks in pennies and therefore are less willing to risk their capital to ease the trades of others. "When spreads were a quarter, specialists were willing to put more money on the line," Mr. Elkins said. Now they make less, so they are less willing to take in large orders from institutional investors. As a result, these investors "have difficulty moving large positions in the market because as soon as they show up to sell, all the bids disappear." ---------------------------------------------------------------------------------------------------- Other complaints come from investors who try to trade Big Board stocks on regional exchanges, like the Philadelphia Stock Exchange. One trader there said that when he submits a customer bid or offer on a stock to the intermarket trading system that is better than the price then trading on the New York Stock Exchange, it is routinely ignored. "The specialist is still obligated to fill national market system orders with any bids shown on the system, but we are shut out," the trader said. "This problem got to be laughable but there was no recourse whatsoever." ---------------------------------------------------------------------------------------------------- Mr. Lek, for example, said that his customers were disturbed by what he called inadequate and imbalanced dispute resolution at the Big Board. When customers have a dispute, they must appeal for a ruling from a floor governor, or a senior member of the exchange. "The governor and the specialist are colleagues," Mr. Lek said. "The judges cannot be the specialist's colleagues. The exchange must have a truly objective on-floor dispute resolution system." He said that in his experience, about one in 50 disputes is resolved in his customers' favor. ---------------------------------------------------------------------------------------------------- Most investors or money managers interviewed for this article said that perhaps the biggest problem at the New York Stock Exchange was that its specialists have something close to a monopoly â competition has not forced the Big Board to become more investor-friendly. Nasdaq, by contrast, has improved, investors say. "The structure of Nasdaq has evolved rapidly because of competition from technology," Mr. Jenkins said. "The proof is there, if you open up and you have technology companies that can compete for the business, you are going to get a better market. There is no competition on the New York, so it's stale."
gene - understood on the differences - i prefer trading nasdaq because i'm *not* trading 5-10k at a clip in a larger name, but smaller size. just thought it was interesting that firms who DO trade in size are starting to prefer the naz... though i'm no fan of the specialists (and think the AMEX specialists, esp. the options, are brutal) i support different types of marketplaces, if there's a need for them.
Is this the same Gene who started a thread on SI called "gene_the_marketmaker"? if yes, I would really be interested if you can continue that thread here.
Is that right, 5 seconds or less? I recently switched platforms about two months ago and suspect that my direct plus fills are slower now. I used to always get a fill at 3 seconds, I was using Sterling whoch I believe does not order to dot/isi, and now my fills range from 3 seconds to 6 seconds and I use ISI. I am wondering if the fill time has changed in general or is it possible that my platform change is causing the difference, or maybe I am just percieving things wrong? Thanks