A long time ago I was working a huge order on the NYSE and I asked the specialist to work a buy order for 2 million shares. Then I asked what price can I buy for. The fist thing he did was give me a tube of KY jelly. I asked what is this for and he replyed wirh a smile in a few hours you will know. If you look on the side walk on the corner of Wall an broad st you could still see the blood stains.
http://www.elitetrader.com/vb/showthread.php?s=&postid=36423#post36423 see this thread for my post on some of the ways a Specialist can help you if you trade with them. As a trader you will trade your beliefs. A specialist has the job of being a traffic cop not to manipulate stocks. There are a few who do (less than 10%) but the majority aren't there to rape you. It doesn't take very long to figure out who just handles the orders and who is trading against their paper. The ones who trade against you---well there is an easy solution ....don't trade them. Don't judge the entire system on the minority. There are quite a few traders who happen to love the Specialist system --such as myself. It is much easier to read one person than 50 I can get out of a huge position on some stocks that are illiquid on one big fill slightly away from the bid /offer when I want to. The NYSE won't allow a specialist to make a trade for himself if anyone else is in front of him unless he lets that person in on the order. NASDAQ won't do this NYSE + is super quick. I'd say about 40% of my limit orders are given a price improvement. (this means you are using DOT and not any type of broker who will sell your paper or make up the difference in a spread for himself) I would say about 70% of market orders I've done are given a price improvement. Robert Tharp
i'm a new trader that traded briefly at a prop firm which traded nasdaq stocks exclusively, and now i trade at a different firm, and am looking to trade NYSE stocks - simply because they are slower. however, there are several things that are horribly wrong with the NYSE, not including the lack of transparancy and lack of speed. someone mentioned KKD. on 1/15, i was waiting for a break of $40 to short KKD (it averages over 900k shares) - certainly everyone else was also - the market was something like 40.02 x 40.15. can't remember the size reflected, which often means little on the NYSE, but it was something like 2 x 8. after the 40.02 bid got taken out, the very next quote was 35.50 x 40.15 - a .65 cent spread, or an instant loss of $650 on a 1k share position, then it goes to something like 39.50 x 39.88 or something. that's bullshit. the stock averages nearly 1 million shares a day, not a tremendous amount, but certainly does not warrant a 65 cent spread. thank god i did not use a sell stop, as i never do. of course, i let the trade go, and it closed at 38.08. you tell me, what was i supposed to do, sell at the support level prior to the break?? this is just one of hundreds of instances that happen on a smaller scale constantly throughout the day. in my limited experience (less than two weeks), if the specialist does not have a good idea of the direction of the stock, it breaks a key level, or the market is going up or down fast, which is basically anytime that poses a risk for the specialist, he will spread the stock to some ungodly level. this morning, there was a .45 spread in MER. merrill lynch averages over 5 million shares a day - a spread that size for a heavily traded stock is completely ridiculous - not to mention that he quotes the size 1 x 1 half the time - come on now. you would never, ever, have a .45 spread on NASDAQ with something that trades 5 million shares. i won't even mention how my limit orders almost never get displayed if they improve the quote. and i know if it does get reflected, or my fill is improved, 90% of the time - i am on the wrong side of the market, or if i'm lucky - the specialist is looking to screw someone else with a bigger order, which is why i'm getting a better fill. additionally, i know that if i'm filled immediately when i take the offer, or hit the bid, i am on the wrong side of the market. i actually started using this as an indicator, and now usually get right out if i'm filled immediately. i used to think people that bitched about the specialist were just deflecting responsibility for there own mistakes - i now know i was wrong. i'll say this though, i'm clearly a novice, and didn't even know redi was not defaulted to use NX. i'll start using it tomorrow - day 11. rtharp - i plan on reading every post of yours in order to get a better idea of how the NYSE works. if you have any other ideas of where to get in depth info - i'd love to hear them. there are very few worthwile books that go into the depth needed. maybe you should write one i'd buy it. despite the above complaining, i swear i'm not someone who complains all the time and blames others for my mistakes - what i'm stating absolutely reflects my experience - limited as it is. certainly the NASDAQ has it's issues also. they both have plus and minuses - you just have to educate yourself on them. i am well aware these are the rules, and if you don't like them, then i guess you don't have to play. although, i'm willing to accept these things as a price to be a trader, it certainly doesn't make it right.
I posted elsewhere that I've seen some really sick moves on NYSE stocks, crazy spreads, where the spec is essentially saying , if you want a fill while the book is unbalanced, you'll have to give it away. Big, out of the blue gaps as well. I admit I don't trade NYSE, and don't watch that often, but it's hard to believe some of these posts that claim only good things happen on the NYSE. Maybe these are specialists trolling for more vic... clients.
The specialist really is not trying to screw you, it not like he waits for your order and does huge spreads to make you crazy. A half point move up on small buys while you see multiple 5k sells . If I see large spreads I will watch for 10 min to see if it is consistent, if it is I am gone, if not protect yourself with a limit order. If I do trade a stock that does these things I just make sure I am in a small enough position so I can ignore it or keep the stress to a minimum. My feeling is if a stock is going to go down , most likely sooner or later it will. Trying not to get sucked in those movements I like to think of as market noise and trickery is hard though.
it isn't referred to as price improvement - it is referred to as the price which the specialist wants to fill you. If the specialist isn't long enough he will not let it trade up until he gets enough shares. He is a trader who has all the info. Enough said! I like the system though because you can read them - even the criminal ones. They are the same kind of criminal so often it is almost not criminal anymore. They trade the stock how they want to. They are not there to lose money. How could a stock with suddenly horrible news gap down 8 points only to trade right up 3. Specialist wasn't short enough. No there are not that many bottom pickers. Those guys are cheese anyway if you ask me. Specialist is not very fair - some are. But most stocks that you want to trade are the crooks. Learn to work with it though. Open book might be delayed and of course they aren't going to show stop orders - but it is a bone and can only help us who use it to its full capabilites.
Hi Robert, There has been a quite a bit of discussion around capitalization money provided by class A members of proprietary firms. This would be placed ahead of , and be intended to protect class B members' trading accounts in case of a major event such as the GE/HON blowup or a business failure . Don Bright has pointed out that Bright Trading maintains a minimum of $10mm for this purpose. What amount of class A capitalization does Echo Trade provide for this purpose? Norm
Sheesh! between this and the "why NYSE" thread, and the way this board is going, if you guys get together at the on-line trading convention, you ought to hold the get-together in the Madison Square Garden and sell tickets! I can hear it now, "and in this corner we have the battling NYSE traders wearing the blue trunks, and the upstart challengers, the NASDQ traders in the other corner wearing the red trunks. Are we ready to rumble?" crimony greg
I hear a lot of people complaining about the spread. When you trade with the specialist they let you pocket the spread. For instance if you are long and he spreads it up offer out a limit order somewhere between the spread and he will match the order with a big print chances are you sell at the high of the day. Also if a stock is acting crazy that usually means there are no orders on the books. Stay away from that stock If there were orders in the stock it would act very smooth and be very tradeable.