I think specialist are criminals for the most part but I also blame day traders for price slippage. ( I too am a day trader) And although I agree with Don Bright on certain things I believe using market orders at the right time are much better than using limit orders. Back to price slippgae.. I have seen many times in stocks there is a 5-7 cent spread with 20 X 5 showing. Then in the Open Book someone comes in to sell 3000 shares at a limit of 2 pennies below the spread. Well all the little day trader players start Directing against the bid... So the specialist fills the 3000 share order at the Bid price or at the limit price ;then all the day traders who tried whacking the bid get put on the offer. All of a sudden all day traders are selling and causes a 15-30 cent fake move down. When the dust clears the buyer comes back in and pushes the stock right back up. Now the question is why would a buyer let the specialist slip the stock and take it for himself? Did the specialist have a pre made deal with the buyer and gave him his buy price? I am not sure......but I am sure 50% of the time prices slip out of control because day traders Direct Plus stocks way to often. Last week i was in the the same stock as my buddy and we were both up 95 cents or so. A huge seller came on the book so I sent market orders and he sent his direct plus order and a limit order. WEll the specialist move the bid away 25 cents. My buddy and many other traders who sent their Direct plus orders got filled 25 cents lower. I who sent my market order got filled with the buyer 15 cents above where the huge seller was selling. You see the buyer (in the pit I am assuming) was way bigger than the seller. Well good thing direct plus is only for a thousand shares becuase my friends other 1500 share limt order was filled where the original offer was. So he lost out on 40 cents on a thousand shares and 15 cents on 1500 Hey that $625 bones he missed out on!!!! So there is a place and time for Market orders and
You're just figuring this out??? Trust me, not one profitable NYSE trader likes dealing with NX monkeys that screw up trades. At the same time, you can make a little bit of money by manipulating these stupid hacks. Often I grab a quick scalp of a steady size in the book and sell it to the stupid NX monkeys. Or as I am watching these morons get short in front of a big offer that has no plans on moving, I pick up some of their stock and wait for the short rip. But in general, NX monkeys only ruin trades, order flow and disrupt slow steady trends. BTW, if you are up 95 cents in what I assume is not a very liquid stock last week, why the hell are you waiting so long to get out? You did the right thing by goin market, usually that is what I do. But your friends being the NX monkeys are often the ones who signal to the buyer to completely pull liquidity. Of course the specialists work with the real buyers and when too many monkeys are in it is just so easy to pull the bids and watch all the stock come in at 20-50 cents lower as these hacks start NX every bid and sending limits down 10 cent below the spread.
Sure, market orders are generally handled well with a single place market, and most Specialists will not risk their jobs to "screw" anyone out of a few pennies.... Market orders on OTC are handled differently, by brokerage firms, etc. Know how your orders are handled before placing them....!!! Don
The short answer is EMLX, summer of 2000. It was a living example of what happens when there is no accountability in market-making. Nearly everyone -- shorts and longs -- who has involved in the trading of that stock on that day was stung badly by a) the rumor b) the disappearing market and c) the botched management of the issue by NASD. It is the single best argument for the specialist system, warts and all. It will be noted that Emulex subsequently sought and obtained NYSE listing (ELX).