Specialist system and alternatives....

Discussion in 'Trading' started by Don Bright, May 20, 2004.

  1. I see that the NySE thread was close, and probably rightfully so. I thought I would attempt to start another one...for rational discussions about the various alternatives...

    1. Go ahead and cite the problems that you can print out and send to me about Specialist abuses.

    2. Post details of your trades that you feel you, as a Specialist would handle differently.

    3. (For everyone) ..Please ask the tough questions, seek the truth....don't fall into the trap that so many of our political types fall into...(yes, the bashing vs. the debate)......

    4. I hope to use this dialogue, with Andre's permission, next week (May 26) in our next "public chat" here on ET.

    Any other topics are welcome...

    Let's chat it up!!

  2. Mecro


    Well even though I'm not going in to trade tomorrow and have the whole night open, those questionably overripe cherries I ate at 5pm are a volatile ingredient in my stomach right now. God knows what cooking in there, I just need to be near my bathroom and smoke some herbal medicine.

    So I got all the time in the world to post here.

    I think a good example would be to see how the different stocks trade. Compare IBM to F and to PFE. F trades great, high liquidity, safe, little specialist interference and it does make moves for a 14 dollar stock. I'm sure that specialist makes a killing anyway from commissions and position trades. Good for him. I like PFE also. IBM is just a tough one and pretty abusive. He goes after stops without mercy, uses price improvement manipulation to the max and is very good with holding and manipulative orders.
    Here is a fun one, FCX. This scumbag prints so much through the market that his quote is near worthless. He price improves the orders in Open Books so much that you barely have anything to go on when you trade it. Those are some pretty basic and key rules that he breaks every second. I mean, really, if noone on the floor has said anything to this guy, that quite a bad sign of regulation or even any concern on the NYSE.

    Also, some of us are quite familiar with the painting of the tape. Which is cool, since traders do the same with Open book. However, today I saw some fake T&S bids and tried to get short against them. 90% of them, you can't get short till after the move is made. So you see this down move but you can't capitalize on it. Not fair.

    BTW this is the other thread. http://www.elitetrader.com/vb/showthread.php?threadid=33037

    Oh yeah, rubberbird, I'm still waiting for your response to my last post in that thread.
  3. it's an imperfect world, so imperfect behavior is normal, not exceptional. the beauty of our system is how well it works given the dark side of human nature.

    nevertheless, fraud -- quotes that aren't honored, trade-throughs, and front running seem to have grown to epidemic proportions, and must be checked.



    forgive me for repeating myself, but it's fruitless for screen traders (and floor traders, for that matter) to try to compete with the specialist when he has ultimate control over the market (that's his franchise). Best to face that and trade accordingly.
  4. Don, I've resigned myself to the fact that instead of fighting the spec system over something that is unwinnable( unless the system changes), I've got to adapt and find a different game within the system wherein his inherent advantage is not going to be as glaring. The system I am referring to is swing trading within a day time frame and not tick scalping or someone else here so eloquently put it as tick fu^ki^%!

    Much like your group is Bethesda wherein a trade is on for hours. Any thoughts on that game plan? It is harder since it takes more discipline to sit on your hands instead of clicking the mouse !!
  5. A little "secret"....we tell all of our traders to Never ever trade IBM, except for the opening of course. The stock is controlled by the guys on the CBOE...and has been for 20 years...the only time the Specialist has any input is on the opening. And, of course, we never suggest trading stocks over $50 in price (these days), since the bid/ask spread is usually to wide....so you to not only be "Right"...you have to be "Really Right"....

  6. Banjo


  7. Don, padon my naivete but could u elaborate a little bit on the guys at CBOE controlling IBM? In this day and age of huge $ distributed amongst hundreds of hedge funds, how could "CBOE guys" control a widely held stock. I could see a small stock or cocoa/sugar/palladium but IBM?
  8. how about expiration in general for big caps?
    does it really have a big influence? how about if the price of the underlyer is somwhat close to a highly concentrated strike?
  9. also how often do the specialist and clerks rotate?
  10. Nice commentary, here is an exerpt that mirrors a portion of the article I wrote (July TASC) "Price vs. Speed"

    "In addition to the NYSE's proposed changes, the SEC may alter trading rules to allow investors to forego the cheaper prices normally found on the NYSE in favor of the more expensive but quicker trades on automated platforms."

    It's the "forego cheaper prices" that concerns us as traders. As we all know "10 cents per day on only 5,000 shares = $100K per year".... and the fact that "institutions" and most retail investors don't care about a dime or two in price, I hope that we can maintain some pricing edge.

    We shall see....(thanks for the link to the Silicon Investor letter).


    #10     May 21, 2004