NYSE To Trade QQQ, SPY And DIA Starting On July 31 NEW YORK, July 12 -- The New York Stock Exchange will initiate unlisted trading in the three most-active exchange traded funds (ETFs) on Tuesday, July 31. They include the Nasdaq 100 Index Tracking Stock (QQQ), Standard & Poor's Depositary Receipts (SPY) and The Dow Industrials DIAMONDS (DIA). The Securities Exchange Act of 1934 provides that securities listed on any national securities exchange may be traded by other such exchanges on the basis of unlisted trading privileges (UTP). The NYSE will provide unique benefits in ETF trading through market making, state-of-the-art information and execution platforms of Network NYSE SM, a competitive pricing model and a dedicated customer service help desk. Under a modified fee schedule for the UTP ETFs, the NYSE will not charge transaction fees to any constituent for the first three months of trading. Specialist firms will also waive commissions during this period. After three months, customer agency trades are expected to remain free of Exchange transaction charges, while member-firm proprietary trades and specialists are expected to be subject to competitive Exchange fees. Specialist firm Spear, Leeds & Kellogg will be responsible for making a market in QQQ, and Bear Hunter Structured Products Trading for SPY and DIA.
This is an interesting topic. Unlike options , dual listing ETF's on the NYSE may not work for the benefit of the trader , Here's why : Assume the market in the QQQ is Bid 43.06 Ask 43.10 . If I Bid 43.08 for 4000 QQQ and there is no one else offering, the market becomes Bid 43.08 Ask 43.10. The specialist is not obligated to "hit" my bid. The specialist is the only "trader" , all others in the specialist crowd are floor brokers. Unless the crowd of "floor" brokers have orders in hand, no one will complete my order to buy 4000 QQQ. The AMEX is also a specialist system , but there is also a crowd of traders in most active ETF's(QQQ,DIA & SPY). In the QQQ on the AMEX there may be 8 other market makers(well capitalized) competing with the specialist. Lets assume the market on the AMEX is also Bid 43.06 Ask 43.10 , If I go into the crowd and Bid 43.08 for 4000 QQQ, a competing AMEX market maker could complete my order. The reason is because he might have a large long postion and might want to sell ahead of the specialist , so he/she could be entilted to sell all 4000 QQQ( not share the trade with the specialist or other Market Makers). The trader might work for a firm that is self clearing and might be able to lock in a very small arbitrage descripancy(say .02) with the QQQ Nasdaq 100 future. The fact that the AMEX has a specialist and additional market makers work to the advantage of the off floor trader. Will the NYSE offer the liquidity & depth of the AMEX ETF markets? Time will tell. I would appreciate any comments from fellow traders. Gene Weissman Managing Member Lieber & Weissman Sec., L.L.C.
It seems to me that with these tracking stocks already trading on ECN's such as Island, the addition of trading on another exchange such as the NYSE simply gives a trader another price and routing option for their trades. So in my account with IB, I can pull up the AMEX, NYSE and ISLD routes for the QQQ, see who's got the best price and send my order there. Of course if you're looking to split the spread rather than go after a bid or offer, then you have to take certain things into consideration as Gene said. As he pointed out, in that case it may be best to route to the AMEX. But overall, in my opinion, it's always great to have more routing choices.
Well put. More routes are usually better. However, I believe you are more likely to get price improvement on the AMEX. The more Market Makers in a crowd, the deeper the "book" in ETF's. It will be interesting to see how the NYSE handles these ETF's. The AMEX seems to be better at derivatives & stock baskets. Gene Weissman Lieber & Weissman Sec.,L.L.C. gweissman@stocktrade.net
This is a good development, in my oppinion. My experience with the QQQ Amex specialist is not good. I did a couple of test market orders. Every time I got filled at the worst possible tick within the next minute. Several times it took 90 seconds to fill a market order of 100 or 200 QQQs. Other traders I have talked to, have confirmed my experience. Market orders on the NYSE usually gets filled in seconds on highly liquid securities. If the NYSE puts a good specialist on it, my guess is that AMEX will be reduced to minor player in a very short period of time.
here is a link to some more info about this.. http://www.nyse.com/pdfs/1690SMB.pdf i agree that orders routed to the NYSE will not have the same liquidity available as what is currently available on the AMEX.. of course, thats a two edged sword.. while there may not be anyone on that exchange to fill your 4000 share order at 43.08, there is also a reduced possibility that someone will step in front of you at 43.09.. another thing to consider.. the NYSE will be using NYSE Direct + to execute small orders under 1099 shares.. this is an auto-execution system that executes against the specialists book, and should be faster (avg time 2.5 seconds) than the system being used by amex(takes forever).. alot of discount brokers like mytrack and datek already use superdot for NYSE transactions and if they switch over to the NYSE it will provide alot of market orders to the market, providing fills for limit orders like the one you described.. but, who knows.. let em build it, and then we can figure a way to exploit it =).. -good trading -qwik
Alot of the AMEX stocks are not that "liquid". Remember , this is a specialist system , not an ECN. There is no "auto-Execution" like hitting an ECN. If you trade the QQQ or SPY on the AMEX ,you will get a good execution & price improvement at times. If the AMEX is offering QQQ at 50 for example and you Bid 50, there is no automatic matching of the orders(like an ECN fill). The specialist clerk or specialist must complete the order. Trading NYSE & AMEX stocks is very different than NASDAQ. Sometimes it seems like you are trading in slow motion. QQQ trades over 20 million shares per day on the AMEX(sometimes over 60 million). You will get a good fills in QQQ & SPY on the AMEX and sometimes price improvement. Gene Weissman Lieber & Weissman Sec., L.L.C. gweissman@stocktrade.net See us at http://www.stocktrade.net
well, i have to admit i'm surprised by gene's comments. out of all the specialist that i've traded in the past 3 years, i would rate the qqq's specialist as the most frustrating. i don't know if he and his clerks are just overwelmed by the volume traded but my fills were horrendous. i know i would trade the qqq's if i got a fair shake, but holding cancelations for over 2 minutes just doesn't lead to big profits for the trader.
The primary market for the QQQ is on the AMEX. If you are mainly trading NASDAQ stocks and are now trading QQQ, there are going to be some advantages & disadvantages. If you are a daytrader or "scalper", on very busy days , cancellations can take a while to get an "out". This is a problem with the specialist system in general. There is no automatic out, like a cancel on an ECN. Remember , all "cancels" have to be manually cancelled by the specialists clerk's computer. A satisfactory time for a cancel in "normal" markets in a specialist system is 5 to 30 seconds. Remember, you are not the only customer. In active markets like the QQQ, fifty orders might cancel in a minute! The specialist must manually cancel each order(punch the cancel key for your order in the electronic order book on the AMEX). In the specialist system, a large order may get more attention than a 500 share order. A 4000 share QQQ market order can be "arbed" against the NASDAQ future , so the specialist and traders might handle that order before a cancel for a small order. In very busy markets, the specialist could take several minutes to cancel an order. If you are trading QQQ for a quick "scalp" on 500 shares or less, you might route your order to ISLD(I am assuming you have a direct access order execution system with an ISLD route). If you are trading QQQ on a direct access order execution system like REDI+ at Lieber & Weissman, you might enter an order on the AMEX between the Bid-ASK spread and get price improvement . When the QQQ's are running I could sell my order on ISLD and have a small trader "pay up" for QQQ's at a higher price than the AMEX offer for example. We have some very successful QQQ traders at our firm, trading on the AMEX market. However, the AMEX and specialist system has it's faults. The 50,000,000 + shares the QQQ's often trade shows that there must be alot of succesful traders profiting from them or they would not be doing that type of volume. Be aware that alot of the QQQ volume is arbitrage related. Gene Weissman Lieber & Weissman Sec., L.L.C. gweissman@stocktrade.net See us at http://www.stocktrade.net