I see alot of threads on this board about the Specialist and his dirty tricks. Why don't we get a petition to turn the NYSE into an ECN like the Nasdaq. If the SEC is looking out for the investor and want to enforce laws, then they would be aware that monopolies are illegal. We can finnally get rid of the Specialist and his BS front running games if we eliminate him. The NYSE could be turned into a museum and the exchange could go the way of the ticker tape machine and typewriter. BMW
No! How can we get price improvement from an ECN?? The specialist system is policed well enough by NYSE that we can still make money. Thats just NYSE though... all AMEX specialists should be in jail...never ever trade with them.
Do you really think that occasional price improvement offsets all the times that the specialist jacks you? Is there a way you trade that maximizes your chances of price improvement? If so, how do you do it?
The real question is: How can we replace the specialist by a computer program, which would be objective, fair, and not greedy? I'm thinking Why can't a computer provide price improvement? Here are two ideas. Please feel free to comment. Method 1: There is only one print every 15 seconds (or as soon as a certain number of shares have been entered as orders). Each print matches all the limit orders that can be matched plus all market orders at one and the same price. It would be kind of like an opening print every 15 seconds and no other prints. This could be programmed easily and would eliminate the specialist while providing a reward for adding liquidity (other than the miniscule ECN rebates). Method 2: Similar to method one, but on a per-user-basis: It would work like a regular ECN (ISLD, Globex, etc.), but if a participant sends in a large marketable order, all the orders he takes out get price improvement accordingly (like it was supposed to be on the NYSE until a few weeks ago). A slight difficulty with this method would be that we would have to make it illegal (or even better impossible) for someone to circumvent this rule by submitting several small orders instead of the big one. My first thought would be that if he sends more than one marketable order within 15 seconds (or whatever time will prove to be reasonable), then the system will amend the prices on all orders except the last one to accurately reflect the fact that it was really one big marketable order sent in several chunks. But of course this rule should not work against the price taker too excessively, so I we should make sure that in no case prices be amended under this rule more than 15 seconds (or whatever time we set for this rule) after the original execution. So, how about all this?
Either would be an improvement. I think I would still prefer a straight ECN model. Any limit orders that can be matched are matched immediately, and market orders take out all of the existing book until they are filled. I truly dislike the NYSE way, even though I have to live with it.
Price improvement is a joke by the NYSE on traders. It is taking two dollars from you, then refunding one dollar back as "price improvement". Its like the old retail scam where the store raises prices and then offers a "discount" off the higher price. Only a fool would think that the NYSE is doing the pubic a service with "price improvement" - IMHO. The NYSE as an ECN would be the fairest for traders - which is why the NYSE members will fight it to the death.
speaking of which...........fnm really pulled a nice one this morning.... froze the book with 1x1 gapped the stock up 20 cents....then froze the book again for a few minutes and gapped up another 10 to 15 cents...then froze the book 1x1....then gapped up...very hard to get out of...the guy had to make a fortune this morning.......i'm moving to NY to become a specialist!!!
I don't understand all this complaining re specialist's tricks...if you keep getting taken by a specialist then don't trade with him or even their firm if their style comes from the top down. do your homework. trade with different specs till you find one that you can make money with. or do this as an experiment: trade with an amex specialist for a couple days...after the pain of that experience you'll come away with a very different view of the nyse system.