Two threads that have helped me a lot when it comes to understanding the mechanics of the NYSE tape. This is an old one, so some of you might recognize it, but I wanted to pass it along to some of the newer folks as well. Not enough solid resources from wise people out there, so I hope it helps! Enjoy. http://www.elitetrader.com/vb/showthread.php?threadid=3282&perpage=6&pagenumber=1 http://www.elitetrader.com/vb/showthread.php?s=&threadid=2267&perpage=6&pagenumber=4 ~ Explode
I would probably get flamed big time for this but efforts would probably be better channeled towards other skills besides reading the specialist for when Reg NMS comes into effect in about 4-8 months, the spec "power" to lock a stock and walk it down or up for 1 min for that final cleanup print would be eliminated. Any big order not filled by ANY exchange within 1 second would most likely be chopped off into bits towards Boston, ECNs, regionals et al.
So you're saying a specialist will no longer be able to gap/up a stock for a cleanup print but will instead send it off to other exchanges if there's no liquidity nearby? Not sure what you mean about locking and walking the stock up for a minute, unless you mean turn off direct+ and hold market orders. But I never see that done for over a few seconds. I haven't looked closely into the specifics of Reg NMS. ~ Explode
Nobody really knows what the role specialists would have under Reg NMS. Even the OMS vendors like REDI and LAVA say that NMS is a moving target as of this time. But basically the days when a spec can lock up a big order and paint the tape like 50b /52a 10 x 500 ......... with 35 being the clean up for 100,000 shares print would be severely curtailed since B/D's would be able to trade thru "stale mkts" . That is the THEORY. Implementation and more importantly the reaction of the mkt participants are another.
BTw, I don't think the spec will send it to another venue, more like the sumitting broker would cancel the NY order and send it themselves.
Ah, so you're saying in that case his ability to push it down .15 would be limited as the order could be immediately passed through to liquidity on ECNs, up to .15 down? Ultimately that volatility will drop due to increased access to liquidity off the exchange that we won't be able to read based off of specialist prints/quotes? Not entirely clear what you mean. ~ Explode
Doubtful...how often do you see 20-100k sitting on ECN's to be cleared? I think the new rules will affect daytraders more than the funds with blocks. There are already LRP's within .25-.5 of the inside price and I hardly see them used.
Most of the time, I see the spec just gap and freeze when he's working on a big print, and the ECNs provide plenty of liquidity inside the gap. What's the real improvement here?
Dustin, I agree with you that those won't sit on other venues waiting to be taken, however, from what this OMS guy was telling me in that scenario I described, the remaining unfilled within 1 second block will be canceled and will be sent to other pools of liquidity. The big diff is that that 40,000 will not be displayed but will be sitting in the OMS's server ready to pounce on other liquidity pools. Honestly , I don't know how these algos work but my neighbor from this OMS vendor was explaining to me the intricacies of how these big blocks gets TWAP and VWAP 'ed and it makes my head spin. He basically said that the cancel replace in NY would prob quadruple and that slow fillers would be shut out. I am confident he knows what he is talking about since he deals with the goldmans, bears of the world daily. He did say it is a fast moving target this Reg NMS to this hour. HOwever the underlying thread/theme is that the Spec won't have a lock on that stock anymore.