NYSE joins the dark-side.

Discussion in 'Order Execution' started by tripledtrader, Jul 5, 2012.

  1. Occam

    Occam

    This is an unfortunate response to the prevalence of the wholesaler-B/D payment-for-order-flow deals that eat up virtually all retail order flow.

    It's unfortunate because there are real solutions to the problem, such as forcing all client orders into a competitive marketplace (e.g. an exchange), OR forcing B/D's to credit clients with all payment-for-order-flow and/or internalization profits.

    The SEC's proposed "Trade At" rule would also push things in the right direction, even if not a complete solution. Of course, "trade at" was attacked by the parties that feed off of these deals, with some pretty goofy arguments that amount to "if we can't skim our clients behind their backs, then we might have to raise prices".

    What we're headed towards is an ugly oligopoly dominated by the big firms and hence much larger slippage for everyone but those few big firms, who will receive said slippage as pure profit.
     
  2. Exactly.
     
  3. bellman

    bellman

    ++occam.

    Any chance we've reached the tipping point where enough non-institutional traders see the fallacy of dark pools and order internalization to actually do something about it?

    Sadly, I doubt it. Most retail guys don't understand the big picture.
     
  4. SEC obviously feels that we haven't hit a tipping point, otherwise they would address the real issue.

    My overall thoughts: The NYSE RLP program will probably not have much of an impact in the way of decreasing marketable retail order flow to the NBBO, as that flow is already diverted (OTC market makers internalize almost 100% of it currently). The program is simply a way for the NYSE to get a piece of the action.

    The bigger problem I see here, is that this approval tells me that the SEC sees NO problem with the current market structure, and obviously has no intention of addressing the concerns that internalizers, via stepping in front of displayed liquidity by a fraction of a cent (sub-pennying), are discouraging displayed liquidity. I had hoped that the SEC might follow Canada's lead and make internalizers provide meaningful price improvement over the NBBO. This is obviously not the case.

    Bottom line, there is no solution to our sub-pennying issues in the near future.
     
  5. 2rosy

    2rosy

    thats the same thing as on the floor when a filling broker would send all his orders to his brother in the pit.
     
  6. jem

    jem

    Its odd in the 90s the sec spent all its time promoting the dis integration of markets so as to increase competition and decrease slippage and the last decade has been spent trying bury pricing information and screw the public.
     
  7. bellman

    bellman

    Exactly, this is a throw back to the good ole days when only the market makers saw the order flow!

     
  8. Yep....SOES bandits took it away in 90s...now it's coming full circle, as market makers take the game back.