Stop dealing options

Discussion in 'Educational Resources' started by NoMoreOptions, Apr 17, 2003.

  1. Trajan

    Trajan

    Sail does have valid points, however, he neglects to mention customer advantages. The most important one being priority over MMs. It was nice today to get berries in front of the crowd after they had been on that market longer than me. Some days it seems I get everything and others days nothing.

    Another thing is that busts go almost entirely one way, that being in the customers favor. I have personally let CSs out of a bunch of trades which nearly always was beer out of my mouth. As far as two sided markets go, I have no problem entering multiple orders on the same option. I read that earlier today and remembered it being discussed before, then looked at my order screen and said,"oh well".

    I use the system as it exists to my advantage. What makes you think a free for all system would help your trading? In such an environment, there will most likely be even less edge than now. The impediments listed above are despise by all of us, including me. I could even go on a rant about the exchanges that would make QDZ and others look nice. I despised(notice the past tense) these places far more than most people here ever will. I was there as a MM and know how these places operate. However, that was in the past, my focus now is how to turn my knowledge and experience into profit. This means using the present advantages for CS orders. Currently, these orders have priority over firms, this is slowly melting away and will be entirely gone in short order. Enjoy it while you can because the BOX isn't gonna be a panacea. How do you expect to trade anything when Trajan is ten cents wide, a thousand up, and he has priority?

    Just joking about being a thousand up, remove Trajan and stick in Goldman.
     
    #31     Apr 17, 2003
  2. Suddenly it is poor form to complain about the ripoffs on the options exchanges? What difference does it make that some off-floor traders make money? The issue is fairness. Some people made money trading Nasdaq back when they ran a rigged market too, but that didn't make it right.

    The bottom line is that money goes where it's treated best. Can anyone honestly say that's at the options exchanges?
     
    #32     Apr 17, 2003
  3. My money is going to NQLX, OneChicago, and Globex, because that's where it is treated best.
     
    #33     Apr 17, 2003
  4. Trajan

    Trajan

    It is poor form the way QDZ does it. I wholeheartedly support his efforts to get rid this stuff. I just don't support him. Maybe he has a weird online personality that he express here and is normally a good guy, but he needs a serious attitude adjustment. He has crossed the line from complaining to blaming these rules for his failure. My previous post was to illustrate that whatever the conditions are, one needs to adjust in order to profit.

    Another thing about cancel fees, to say there is no cost to the exchange or members is absolutely false. Whether it is electronic or handled by person, there is cost somewhere on every order that goes into the exchange. It costs real money to hire people and buy technology. Now, whether or not it is legal according to SEC rules or good customer relations is a different matter, however, it is entirely fair to try and recoup your costs. So to say," charge for canceling orders even though there are no real costs" is not realistic.

    " make orders contingent on the behavior of the underlying security is fundamental to option trading."

    Where to begin with this one? If you want this then become an exchange member. I worked on the execution side of the exchange and these orders a big pain in the butt. We sometimes refused these. It is the broker who is refusing this and their aren't many on the floor left who will take them unless it is for size.

    "limit competition by prohibiting entering orders on both sides of the market"

    I completely agree and should be gotten rid of immediately. The only problem is that these are private organizations. This rule doesn't take money away from you but does take opportunity away. You aren't gonna win on this one. The exchange will respond to any SEC questions by saying the by doing so you are in effect acting as a MM. MM are members and serve a purpose, yadda, yadda, yadda. Rule sucks but you won't get very far with this one.

    "stifle innovation by restricting machine order entry without human intervention"

    Seems bad on the face of it, but is entirely fair from the perspective that MMs should have certain rights as members, the major one being the right to mass quote. Join the exchange if you want this. If it is a mass execution across the market, it's one thing but to act as a MM off the floor is another. Part of the problem from this stems from the exchanges own stupidity when options went multiply listed. They had the system set up so that it would automatically execute the arb on crossed markets at the CBOE. It was possible to get Raes trade because of an offer on the Pcoast and then buy the same contract back for an 1/8 loss because of a bid on the Amex. It happened a lot in 1999. What pissed me off wasn't the fact sopmebody was doing this, I think the whole thing was brilliant and admire the guy who did it, but the utter lack of action by the exchange to simply turn of the auto-execute system irked me to high heaven. Alas, as good reactionaries do, they over reacted to an extreme.

    "allow insiders to break trades which go against them"

    I've answered this one already.

    "allow market makers/specialists to turn off auto execution at will"

    Markets can get disorderly and it is entirely appropriate to slow things down. As a MM, it is not your obligation to lose money but it is to make orderly markets. This benefits everybody involved. You have no idea how good you have it today. I've got war stories from my runner days that would make you cringe. I think it used to be a half hour that an order would have to get filled during a fast market. Can't remember if it was that or 45 minutes.

    "allow same to back away from quotes and/or trade ahead of customer orders"

    Yea, MMs will try to weasal out of bad trade. So what? Bad customer service is all I see. As far as trading ahead, there are laws governing this and should be enforced. However, don't be pissed if somebody is a step ahead of you.

    "Pay for order flow"

    Seams kind of cheesy to me. Should it be outlawed? Not in my opinion, if you aren't happy with your executions I suggest finding another broker.


    Is any of these illegal per say? No, not really. I did see things which did go on which were illegal. Sometimes the activity was to the benefit of the customer(believe it or not), sometimes it didn't and most often, it was neither. So when QDZ starts whining about this or that, I just think what a loser. It's one thing to complain, we all do, it's just old when that's all he does. These things are minor details in the larger market.
     
    #34     Apr 18, 2003
  5. Boyal Trajan, give me the reasons for why the options exchanges should have these "minor" special rules while other majority exchanges don't have them. Are you saying NYSE should do the same for the reasons such as costs? So are the options exchanges in fact the leader to do the right thing?

    Regarding your suggestion to QDZ on adjusting to profit, (I don't know QDZ. Maybe he is one of the guy sitting in the corner pit on the CBOE floor. Do not do business with him if you find out who he actually is.) my adjustment will be to AVOID losing money at the ultimate disarranges as long as I feel they are not minor to me. So long, options, I will be missing it and maybe check back later.

    Thank you for showing us many perspectives from the other side.
     
    #35     Apr 18, 2003
  6. Babak

    Babak

    #36     Apr 18, 2003
  7. Trajan

    Trajan

    This sentence alone illustrates your total ignorance of the markets. As I said before , these rules suck and, yes, they exist to preserve profit margins. It has been rather ineffective in pursuit of this goal. I think you may be QDZ and Harrytrader combined! Is this possible?
     
    #37     Apr 18, 2003
  8. def

    def Sponsor

    Trajan,
    I agree with many of your comments but disagree with others.

    The main difference IMO is that market makers should have no advantage over anyone else except lower fees and maybe mass loading privileges in return to the obligation to show real time price prices and/or respond to quote requests within a given width and amount of time. Naturally, they should have to HONOR their quotes as well. This method works well for most exchanges outside of the US.

    What is troublesome to me, is that rather than innovate, lower costs and become more open to the increasingly sophisticated off floor traders, the exchanges are behaving like a cartel and employing anti-competitive measures.

    If they really opened up, upstarts like BOX (and later on perhaps Eurex) wouldn't see any need or edge in offering US equity options.

    Yes, there is a cost to canceling or modifying trades but isn't it strange that the charges arrived with the onset of linkage and that all the exchanges implemented them in similar ways? Why aren't the exchanges giving credits to firms that do size trades or volumes? I know from a systems standpoint, the cost of a cancel certainly doesn't approach $1.

    I should also add, that if Goldman or another firm is 1000 up across 10 cent wide accross all strikes, I'd be drooling as either a retail or institutional player. The liquidity and opportunities would be enormous.

    BOX: last I heard was that their rules were up for approval at the SEC - naturally the other exchanges are crying foul. Read the comment letters linked from their site, they are fairly interesting.
     
    #38     Apr 18, 2003
  9. Several years ago the SEC and Justice Department sanctioned the option exchanges for illegal business practices ( http://www.sec.gov/news/press/2000-126.txt ). As part of the settlement, the exchanges were to increase surveillance on the floors.

    A year ago, I requested compliance data through the FOIA. The SEC brushed off the request; however, the Justice Department did respond saying that they will provide the data once their investigation is finished. I keep updating my request and they claim that the investigation is on-going. Perhaps the behavior on the floors will change once a few individuals get walked off the floor in handcuffs.

    If you have a problem with the exchanges, let the Justice Department know.
     
    #39     Apr 18, 2003
  10. omcate

    omcate

    It seems that we have to wait at least until July.

    :( :( :(
    :( :( :(
     
    #40     Apr 18, 2003