We are all market makers and specialists. We just have less depth and/or commitment than the members. We obviously aren't granted a franchise in any particular issue, as well. Which means, we don't have the monopoly privilege, so we are at a competitive disadvantange.
chasinfla, You are totally right about the role of traders as MMs and specialists with second-class standing. I know that some could classify my trading style as that of an MM with an extremely wide spread. I wonder if any traders here are active & profitable as pseudo-MMs for low-volume stocks? Seems to me like a skilled daytrader could frontrun an apathetic MM on some of the illiquid OTC stocks that have large spreads. I don't do this, but I could imagine that it might work. Cheers, Traden4Alpha
Sure, Capital Market Revolution: The Future of Markets in an Online World by Patrick Young, Thomas Theys (out of print) http://www.amazon.com/exec/obidos/ASIN/0273642324/ref=pd_sxp_f/002-3780621-2631264 and forthcoming: The New Capital Market Revolution: The Winners, Losers and the Future of Finance by Patrick L. Young http://www.amazon.com/exec/obidos/ASIN/1587991462/ref=pd_ecc_rvi_1/002-3780621-2631264
I just ordered that first book, after seeing who wrote it. Probably radical and a bit dated, but I hope to get something useful or thought provoking out of it.
Not dated at all imho. Radical? Maybe, but there is a difference b/w a brainwashed lefty or right wing radical that doesn't change even after the facts prove him wrong, and someone who sees the potential of new ideas no matter how unpopular they are. Another book that might be of interest is The Death of the Banker: The Decline and Fall of the Great Financial Dynasties and the Triumph of the Small Investor by Ron Chernow. http://www.amazon.com/exec/obidos/ASIN/0375700374/ref=pd_ecc_rvi_1/002-3780621-2631264
thank you buzzy. the price is certainly right. Benvolent monopolies are a good thing, imho. The problem is, benevolence is nearly extinct, and so monopolies are less benevolent, and more predatory. What follows is the breakup of the monopolies in which a great deal of responsibility and opportunity falls into the hands of the relatively inexperienced and undercapitalized -- the scraps, of course, that are left over after all the devious insiders set themselves up. There arises chaos, warring factions, and perhaps a new monopoly which is run by vultures, into which step politicians who demand their piece of the action by graft and legislation. Witness the breakup of Telephone, the former Soviet Union, etc. Whereas before it was possible, even probable to acquire wealth, it is less so now. The old system saw, in some ways, that opportunities to form capital went to the responsible (by and large); the new system does not police itself; it is a visitation of the economic Darwinism that some had hoped for, and noone cares to follow the rules. The rule of law which protects the innocent is hardly trustworthy anymore. The redistribution of wealth is inevitable, but the outcome will not be pretty. We have thrown off our shackles, only to find that they were keeping us out of the mouths of lions.
I disagree with the preferability of monopolies, although I would say that sometimes they are more efficient than competition, for example, the subways. Any situation of high fixed costs or coordination problems is conducive to monopolies. Monopolies should be monitored someway though. But I don't think that monopolies have many roles in capital markets, much less in securities trading. An exception might be clearing companies. Specialists? I don't think so. And I agree that the last few years' deregulation has been driven by ideological zealots and special interest lobbies. Examples: take the "Nobel prize" Gary Becker, he wrote a few months ago in Business Week that the problem with Enron is that deregulation didn't go far enough... and then last week Milton Friedman said that the government shouldn't regulate CEOs because that would affect risk taking. C'mon this isn't a risk-taking problem, but one of shameless deception and outright theft... Free markets are based on trust and one of the roles of the government is keeping that trust intact by punishing the crooks. Trust is not something that can be bought and sold. Once trust is lost, no amount of "deregulation" brings it back. Look at the energy markets, they are dead, why? is it because of insufficient deregulation? Those Nobel prizes should go back to their cushy tenured jobs, and keep teaching their groupies that efficient market and random walk bullshit. Waksal, Lay, Koszlowski etc etc don't need them, they already have lawyers.
Speaking of books on Market Microstructure (pretentious academic term), one of my former professors from back in the day just wrote a book on this subject. I haven't read it but some here might find it interesting. Regards, Dr. Zhivodka http://www-rcf.usc.edu/~lharris/Trading/Book/index.html
Thanks Dr. Zhivodka. Read the book summary, and the guy says literally that despite the success in Europe of electronic trading, in the US, the ECNs are a failure because they can't grab market share. Right... and if they do it, they are a failure anyway because the SEC would do something about it, no? OK, let's see who financed the book, the NYSE... duh... I'm going to read this book anyway to keep myself informed. I still prefer Patrick Young's book because he is in the trenches, he's an independent trader and nobody pays him to think in one way or the other.
Jeeze Loiuse, relax mate. I never said it was the gospel from St. John I just pointed it out so that maybe someone would find it useful.