Perpetual NYSE Specialist Abuse

freehouse · Aug 21, 2003

Quote from hayman:

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1) Specialists "pennying" front-running activity seems to be on the rise, since market liquidity has dried up of late. Although NYSE Open Book quotes are on a 10-second delay, market orders that are "front-run" by Specialists (by a penny), rarely, if ever, appear as entered orders on the NYSE Open Book. This results in Specialists "jumping in front" when it is advantageous for them, and diminishes the usefulness of the supply/demand information provided in the Open Book, and provides the Specialist with a tremendous advantage. This activity is running rampant these days - the invent of decimalization has been a real boon
for the Specialist; not the trader. The so-called "price improvement" that NYSE allows for, provides for penny improvements for those who are already willing to pay the "market" price for a stock, and causes "price disimprovement" for those that are posting limit orders, and are jumped in front of. This clearly disrupts the laws of supply and demand in the marketplace, and diminishes the usefulness of placing
limit orders. This results in diminished confidence in the marketplace by those placing limit orders, which will inevitably result in fewer limit order being placed. This will ultimately (and has already) diminished the liquidity in the marketplace.

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I am not trying to defend the specialist, but sometime it could be a broker just standing at the post waiting for stock to come in before making a purchase. Thus, you would never see him in open book. For example, if a Goldman house broker is standing at the Disney post with 250,000 shares to buy. He will just stand at the post all day and wait for stock to come in for sale. Then it could be him pennying you (or anyone). Since he is standing at the post representing his order, there is no incentive for him to put anything in the open book. Thus, you will never see him unless you get a "look" from the floor.

indahook · Aug 21, 2003

Quote from praetorian2:

I think you guys are just bitching about nothing. If you are scalping dimes, yes you get screwed. It happens. Who cares. Look at the bigger picture.

I personally made $40,000 today trading a few listed stocks. I entered 5-25k market orders. My slippage was 5-25c at a time. On average, it was 15c on 10,000 shares. I gave the guy $1,500 on every trade I executed. It happens. It is acceptable. I deal with it. I like slippage. It makes me know I am right. Rather than complaining, learn to use the system to your advantage. The specialist does not have that much inventory. Throw size at him, and he will run. Penny him and make the spread. There are lots of ways to win.
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A-freakin men!

jaiko · Aug 21, 2003

For a short term trader there is NO reason to trade NYSE stocks .you have a perfect world trading Nasdaq only

The specialist has all the advantage ---often you cannot get in if you want and often the specialist dont let you out , and sometimes he recompenses you with 1 or 2 cents price improvement

AVOID NYSE-----thats an unfair system for a short term trader

murray t turtle · Aug 22, 2003

Quote from shaq48:

I have to agree with praetorian2..if we choose to play in this playground, then just deal with the playground rules. I can't imagine trading and having to worry about a penny causing me angst. I am not a size trader at all, but I think if a penny is that important to your trading strategy you are trading to big a size or a non exsitent edge. If penny really mattered to my strategy I'd look to trade something that pit traded so I could be at the front of the line..but that would reqiure me to have a big monthly just for the priveledge...I'd rather trade from home and not worry about a penny personally.
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Hayman;
Might want to think more along the lines of institutional trading time frame;
even though I don't look at a 13 year chart much.
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Good that you are watching your business exspenses;
however a penny isnt much, especially on a 30 minute candlechart or 30 day candlechart.

Specialists & market makers persistantly help me on gaps.

''Make hay while the sun shines''-Solomon ,trader king

C Robinson · Aug 22, 2003

" According to HedgeWorld.com, a Harborside+ survey found that over 80% of equity block traders said they are extremely unhappy with decimalizationâs effects on block trading. The vast majority of respondents felt that decimalization should be modified."

palmer · Aug 22, 2003

If you get a bad specialist fill (whether it was MKT or LMT), you CAN do something about it. Assuming you have time, or you have someone to do it for you... call to the floor and have DOT services check it out. I see guys get improvements (sometimes .25 - .50/sh) every day. Most times, these prints that traders were "due" are never looked into (or, researched), so the specialist keeps the difference.
BTW, it only takes about a minute to do it, and you can call pretty much whenever you want; i.e. like, if the day slows down.

praetorian2 · Aug 22, 2003

How would you go about doing it. My broker is IB. I have tried before and they always just say size in front or something stupid like that. Is there a way to really do it myself?

palmer · Aug 22, 2003

I don't know anything about them (IB). Many times, it probably is "trade ahead", or the "trade in the crowd" (love that one, although it IS legit). If they are actually checking for you, it may take anywhere from 5 minutes to 45 minutes; the 1 minute I referred to was just to make the phone call. If they say "trade ahead" within a minute or so, I'd assume that they didn't actually call to the floor.

hayman · Aug 22, 2003

I too, use IB, and although I love the IB system, the support guys give me the run-around as well, and always give me some excuse that the Specialist "said the trade was legal". I pushed hard once - I was clearly traded through - and by the time it got resolved, I wound up getting filled any way.

Is there a # that you know of that we can call ourselves, or is it only through your broker ????

TIA

uptik2000 · Aug 22, 2003

In general I am not a big size trader....if I do 2000 of at 40-60$ stock..thats a big trade for me (although I may have 1 to 4 positions at once)...and I almost always get price improvement on my limit orders. So I'd like to thank the specialist and guys like Kupperman for getting me the extra $.

I have been trading very small lately...200-1000shrs... of more liquid stocks.
The only trouble I've ever had is setting stops on less liquid stops beacuse I had to use the bathroom or something. It only happend once ..but it really moved about .45cents on hardly anything an dthen ran.

Something weird that happened today was: I offered FNM @ 60.65 to short....it traded through and up to 60.70-.75 ..and after about a minute ..came down a filled me at 60.65...it then went up a bit..never to my stop and then died and I made some money on it.

Is that because there were orders ahead? I'm not pissed b/c I made $...just curious.

I've traded a few different products...NYSE , nasdaq, e-minis...I think they all have their own ways of trading. You just have to figure out the way they move..and over timeyou'll figur eit out.

Happy Trading