Exactly how is the order matching algo going to work? ie. Say this is the Level II dom Price Bid Ask ===== ==== ===== 1002 1 1001 1 1000 1 ------------------ 999 1 998 8 997 13 lets say the Stop Orders that are hidden from view and resting at the exchange are: Price Bid Stops Ask Stops ===== ==== ===== 1002 33 1001 13 1000 0 ------------------------------------ 999 1 998 23 997 1000 If there is no liquidity it doesn't matter how you classify and process these stop orders. Can you imagine the crazy gaps in T&S data and bid/ask spread? This will leave stop orders stranded inside the spread. T&S 1 @ 999 1 @ 1001 8 @ 998 Resulting DOM Price Bid Ask ===== ==== ===== 1002 1 1001 0 1000 0 ------------------ 999 0 998 0 997 13 Resulting Resting Stops Price Bid Ask ===== ==== ===== 1002 33 1001 12 1000 0 ------------------ 999 0 998 15 997 1000 Does this lock the market at 998/1001 and only allow new orders inside until the resting stops clear out? What happens when there are no offers? Price Bid Ask ===== ==== ===== 1002 1 1001 0 1000 0 ------------------ 999 0 998 0 997 0 .... 996 - 951 = 0 950 1 Is the current market price 1002/950? Do we just skip all the resting orders? Time to get into the market making game...
Well there goes many traders edge. The edge of limiting downside risk. If I buy at 110 and stop at 108. Theres a chance I will be holding it at 105 not because there was a lack of liquidity or selling presure that widened the B/A . no rather my order became a limit sell at 108 and the highest offer was 107.75 so no one wanted to buy? Just give me the godam option to sell at 107.75 then. Whata buncha assholes. Get it out your ass wallstreet.
But then they should also add a clause that margin calls be abolished and that brokers must eat any loss in the event your account falls below the margin. You know where I'm going with this crap. These regulators don't know shit. All they want is to stop any selloff, period.
The Themis Trading LLC white paper referenced in the OP's notice of the MarketWatch Market Pulse story today can be read here: http://www.elitetrader.com/vb/showthread.php?s=&postid=2963243#post2963243
Stop Loss Market orders are WMDs to an investor. 99% of them have no idea how evil most market orders are unless you are a professional trader sitting in front of a computer every second the market is open. You still have Stop Loss Limit orders. If they are going to abolish SLMO, just allow put buying in any account without any restrictions, including IRAs. "An ounce of prevention is worth a pound of cure"
You can buy puts in an IRA already. It'll be supply and demand in action. No stops = increased put demand = higher IV = higher premium.
thesee market makers for stocks don't want to buying when you put market stop loss...market makers don't want any risk these days. when retail investors put a market order...market makers have to fill the order. it's more to protect market makers than investors. in an illiquid market, there is more risk to market makers as they cannot sell a stock if they buy from market sell orderse and lose money on it. for large hedge funds they don't do market orders cause the float is too thin.
I agree completely!!!!!!!!! I've gotta say though, WHAT THE HELL IS GOING ON IN THE USA?!?!?!?!? After watching, and hearing the ignorance that came out of Odumba's mouth on the CNBC "Investing" show, all I ask for is my Country back for Christmas... Here you go: http://www.elitetrader.com/vb/showthread.php?s=&threadid=207032