If a specialist is manipulating a stock downwards today (e.g. with the gigantic asks and no intention though of selling), how much of an indication is that of his "plans" over the next few days?
Pretty hard for a Specialist to manipulate much (especially these days). They cannot initiate a downtick, cannot initiate an uptick, and can only participate with other orders except when making a fair and orderly market. That being said, the automated programs that are triggered do seem to have that ability, but these from hedge funds and other program traders. IMO, Don
"Except"---Don, can you define this term for us? ;-) Isn't this sorta like loving your girlfriend "except" when you don't?
is there a legitimate reason for the specialist's ability to lock the book, and thus lock people completely out of being able to sell a position? i've always wondered why IB doesn't filter out the specialist crossing his quote so a position can still be sold on other market centers
Generally the reason for going 1 x 1 (locking the book) is to cut off the ECN function for a minute so that they can properly match a large number of shares without electronic interference. With the hybrid system, they have kept this ability. The call it "slow market" (I would think it would be "fast" market, but ??anyway). This allows the Specialist to over-ride the algorithyms for a a minute or two. The crossed markets are another thing altogether, but essentially serve the same purpose of not allowing orders in for a second. don
Based on what your saying (including your last message), it may be either the programmed traders, or the specialists who do the job. What I mentioned does not require they initiate a downtick, rather only to scare away buyers with showing gigantic asks, which also "requires" others to sell at the bid to pull out of their positions, letting the retail folks to drive it down themselves.
How do they define "fair and orderly"? On Oct 19 I was trading MCD and had just gotten out of a long when the specialist widended the b/a to 38 x 40.78 and held that for about a minute or two while the stock went into free fall. The only prints I saw were on ECN's. Now if someone had to get out on NYSE he was screwed. I just don't see how they can justify this when the ECN's were way more "fair and orderly".
This happens all the time...usually it's just the specialist backing off the bid or ask for a short time to sort things out or to print a large block somewhere in that range. It can also be an error price on the bid/ask. This is all part of the "fair and orderly" process, and if you trade NY then it's up to the trader to know what's going on. Most likely in your example NY ended up bringing the bid right back to normal , or printing a block within 5-10c of the last NY price. Any ECN's that panicked and sold at worse prices were probably inexperienced traders that lost money on the trade.