http://online.wsj.com/article/SB10001424052748703506904575592243789868142.html Does it effect retail traders? or Prop Day traders??
This won't affect retail traders. They don't have "naked" access, as the broker checks their orders. Sometimes my broker (IB) has strange ideas about what's unsafe. IB let me sell a credit spread with a $3000 margin requirement (and a $3000 worst case loss) but would not let me buy a CCC rated junk bond for $530, where my worst case loss would be $530 (duh). Both the Lord and IB work in mysterious ways.
LOL. You clearly don't understand what naked access is. Naked access is the situation where a HFT firm sends orders DIRECTLY to the ECN, not going via a broker. Any HFT firm could easily bring down the market to its knees like that since there's NO ONE checking margin (except the HFT firm itself), shorting rights etc. So regardless of the true buying power, it could keep sending orders for unlimited amounts of money and bring down the market to its knees in a matter of (milli)seconds. The whole reason this existed of course is that for HFT firms,every millisecond counts and sending orders directly to the ECN instead of sending them to a broker and have them send it to the ECN, can save some milliseconds, which translates into money for those firms. So, OBVIOUSLY this was a very dangerous (and totally idiotic !) situation. I still find it amazing that a huge flash-crash like on may 6th, caused by this 'naked access' way of sending orders, only occured once this year !! Anyway, now with this rule there's no more sending directly to the market, every order has to go through a broker's riskware first, so if a HFT firm sends orders beyond their buying power, the broker will reject the order.
the trigger of the "crash" maybe(and it's a BIG maybe) naked access..but all those 50%+ drops that did occur because there is no REAL liquidity on these markets..they all..ALL... full of shit.. there is no real buyers or sellers, there no MM's ,obligated to provide prices anymore..US markets are FUBAR...50 fucking ECNS + various dark pools with no rules..every single day i'm having a problem unload $2-5K positions on relatively liquid(again-according to their average volume(which i believe is fake too))..for 1-5 cents you are going to see a fucking cirque de soleil in bid\ask and sizes quotes..
i agree with you bob for someone who has been trading for 11 yrs and on avg does about 5 mil shares a month...i find it harder and harder to get block fills....if ther are 5 ecns all showing 4000 , 4000, 4000 etc and i try to smack the bid ..i may get 1000 lot and everyone cancels its an absolute joke i now add about 30-40% of my liquidity..better for me..but im missing a boatload of fills, and lots more opportunity its caused me to change the way i get in and out of stuff but its a complete joke there are times i cant even get size fills in the spys without chasing it for a penny or 2...its crazy