Discussion in 'Trading' started by JayS, Jul 12, 2001.

  1. JayS


    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.

  2. 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.

  3. 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.
  4. 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.
  5. 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.


  6. here is a link to some more info about this..


    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

  7. tymjr


    Almost every experience I have had with the AMEX has been while I was holding my ankles. ;)
  8. 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.

    See us at http://www.stocktrade.net
  9. Bryan Roberts

    Bryan Roberts Guest

    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.
  10. 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.

    See us at http://www.stocktrade.net
    #10     Jul 13, 2001