we all use the specialist system to profit from NYSE trades. It is definately an unfair system but it gives us and edge if we can get on the right side. what is wrong with just enforcing the specialist rules better?
Excellent post, Tea. I'm rather surprised by the people defending the specialist system. Unless they are one, or are related to one, they should take careful aim at something other than their own foot. However, I suppose that some people are just too clever and capable to worry about mere pickpockets. Of course, with that attitude, the pickpocket may go for the whole trouser one day. Regards, Thunderdog
Don't cry wolf like the people that wanted decimals! Great liquid markets now from decimals. It's so efficient now. Or better yet, the class action lawsuit against the market makers that made all the market makers close up shop and only be dominated by a few such as Knight. Wow, don't you like those 100 share markets? Careful what you wish for.
Totally electronic trading is great untill there is a crash...then watch out....the best thing that can be done is first, eliminating the decimals....they can hide what ever they want to with a 1 penny improvement..... Also, my understanding is that the specialists don't quote 90% of institutional orders that are in their hands......but what to do about that? That is the institutions choice do demand it.....with MER and GS owning specialist firms...I doubt you will see them dissapear in the immediate future......with the regionals dying....what about a central order book????
A CLOB would be great but then you lose specialist and maker makers. Im sure everybody would love to see that but at least they are there. It's hard to create a perfect market because benefits to some will be disavantageous to others. People will only take risks if they get paid to. With decimals, they are(specialist) aren't paid as much to take the risks.
trust me im not defending them nor am I too smart to avoid their little games. I get screwed by those pigs daily. but it is just part of the game. but that is sometimes how i make money by taking advantage of the ineffeciency of the NYSE.
http://money.cnn.com/services/tickerheadlines/for5/200310030411DOWJONESDJONLINE000152_FORTUNE5.htm i doubt this is an isolated case.
Here is part of a great article written for Barron's Online about the NYSE and the specialist system. Don't Expect Big Change at the Big Board Howard R. Gold - editor of Barron's Online LATE LAST DECEMBER, beneath ornate chandeliers in the magisterial headquarters of the New York Stock Exchange, regulators announced the historic $1.4-billion settlement of the research scandal that had rocked Wall Street. New York Attorney General Eliot Spitzer, whose revelations about Merrill Lynch's damning e-mails ignited a public furor, was joined by Stephen Cutler, the Securities and Exchange Commission's Director of Enforcement, and representatives of other organizations. But no one upstaged Dick Grasso, the NYSE's chairman and chief executive officer, who clearly relished his role as impresario of the settlement and champion of the individual investor. "Restoring investor confidence is paramount," he declared in a news release. "Investors need to know that the firms they do business with act only with the highest standards of honesty and integrity, putting investors' interests above all others." How hollow those words sound now! Grasso, of course, was driven from office after the firestorm over his extraordinary $139.5 million pay package, and the institution he personified is in turmoil. Clearly Grasso was to some degree hoist by his own petard. By being so visible about the research settlement and the NYSE's new governance rules for its listed companies, he may have put the issue of hypocrisy front and center. The revelations about his gluttonous compensation only amplified the investing public's cynicism that the NYSE was yet another institution whose credo was, "Do as I say, not as I do." So, what's next, now that he's gone and former Citigroup chairman John Reed has taken the reins as interim NYSE chairman? Reed has said many of the right things (you don't get to where he did in his career without knowing how to do that), but how much really will change? And is the New York Stock Exchange as we know it salvageable? My short answers are that I think the organization of the NYSE will change, but the changes won't be deep enough to rile the powers that be. I don't think the Big Board is workable for the long run, but the people running it won't have the guts to stick a fork in it, as they should. And technology will continue to give investors more choices, causing the NYSE's "open outcry" system to disappear over the years. In the short run, there will be changes. Reed's decision to scrap a special Exchange committee's governance report was a sign of that. But Reed has made it clear he's a short timer. Who'd want to abandon a leisurely life of early retirement to step in to this hornet's nest? So, don't look for him to spearhead anything but the most obvious organizational changesâfixing what he calls in his trademark technospeak the Big Board's "managerial architecture" A separation of the chairman and chief executive's function, lower pay for top Exchange executives, a smaller board of directors bereft of Wall Street CEOs --these are no-brainers. But those changes are basically "architectural," or organizational. They are not structural, which would fundamentally change the way the exchange does business. That's why I don't think a split between the regulatory and business functions of the exchange is a slam dunk. SEC chairman William Donaldson (Grasso's predecessor as head of the Big Board) basically gave the game away in his testimony to Congress this week. Suggesting that such a split might not be in the cards, the SEC chairman testified, rather implausibly, that the Exchange's self-regulation has worked "pretty well." Pretty well? For whom? Wall Street? The Wall Street Journal's Deborah Solomon set the record straight on that one (see "SEC Won't Push Radical Change on NYSE," October 1). She reported that the NYSE levied only $19.2 million in fines during the five and a half years after January 1997, while the NASD collected $210.6 million worth of fines and the SEC $480 million over that same period. The Big Board must be the only regulatory body that can make the SEC look aggressive! Problem is, real change would inevitably threaten the seat holders on the Exchange; the giant Wall Street firms, and particularly the floor specialists, who are in a desperate but ultimately futile fight to preserve a system that increasingly looks obsolete. "Because the broker-dealers own it, they don't want to undermine it," says Sarah Teslick, executive director of the Council of Institutional Investors..... ......Historian Charles R. Geisst isn't too optimistic, either. Calling Grasso "the last defender of a floor trading system that's starting to show its age," Geisst, a professor at Manhattan College and author of the book, Wall Street: A History, sees no incentive for change among the people who run the NYSE. "Transparency' is a word they can't spell," he says. "They just don't get it." Teslick thinks the only impetus for change would be if the Exchange "goes public and their seats are bought out for massive amounts of money." Remember, though -- even Grasso couldn't pull off a public offering of the Big Board in the midst of the Internet boom. But change may be thrust upon the NYSE insiders. The rise of Electronic Communications Networks (ECNs) like Instinet, Island and Archipelago and the emergence of the all-electronic Nasdaq clearly show which way the wind is blowing, although the bear market dealt heavy blows to some ECNs. The specialists' claims that the "human touch" makes markets work better sound more and more strained, especially in light of the Big Board's reported investigation into so-called "front running" at some of the big specialist firms. "I've thought for a long time that the specialist system might go down in the electronic world, although they're resisting it very hard," says Professor Alan R. Bromberg, an expert in securities law at Southern Methodist University's Dedman School of Law. Bromberg ultimately sees a "withering away of the stock market," but he thinks the big institutional investors are the only ones who can force real change now. Note well that Grasso stepped down a day after California State Treasurer Phil Angelides and New York Comptroller Alan Hevesi called for his resignation. That's clout! Until now, the big investors have been reluctant to use it. But unless they start doing so now, don't look for the NYSE insiders to do much more than change the Big Board's "managerial architecture" without rocking the rest of the boat.
An exchange specialist has up to 30 seconds to cancel a listed order posted and preferenced to them. In a fast moving news stock that can be a very long time. This happens on all the exchanges not just the NYSE. The CHX and BSE are among the worst offenders
For all the difficulties I've had with the specialist system, I think shneed says it well. I've criticized the system, but I've also said I would not want it done away with. The only time I've really been stomped by a specialist is when I've competed with him head to head. Doing that is a bad bet since he makes the market, he has the edge, and he's out to win just like I am. I've written elsewhere that the specialist system can be likened to an insurance policy against bungee rides like EMLX in the summer of 2000. Insurance comes at a cost, and the premium is paid to the risk taker -- the specialists. Competition works and will continue to refine the markets. Some trades are better done on NAZ, and some on NYSE, and others can be done anywhere. And the jury is still out on what this business will be like in 5 years. As for the 'electronic-ization' of the markets, the gadgets are just tools. Markets are and always will be all about people. Eliminate the participants, and you eliminate the market.