This is a non-event. When these traders take the time and effort to actually learn how to trade instead of manipulate the market, they will realize that they are much better off. Anyone who is scheming to come up with an alternative, missed the point of the SEC's declaration. It is not the product itself that is deemed inappropriate, but the action following the execution of these married puts. There are legitamite uses for them. Trying to pound bids by not trying to get the best fill is clearly manipulative. The action itself of pounding bids is what the SEC is against, not maried puts. Married's as they were designed by the "facillitators" had no economic justification. (Like SSF's I might add.) At the end of the day, no matter what the prop firms are trying to do to get around this decision, the SEC just has to ask the trader one question, "What is the reason you put this transaction on?" With the design of married puts being one day conversions, the only answer was for long stock. Oops. Doing a legitamite conversion on an exchange is no better if the purpose is to pound bids. Those days are over. Learn to trade. Learn to offer short at the appropriate time. Don't wait until the last second and try to "me too" them. Go buy a put on the ISE electronically.
You obviously have no idea what you are talking about! If the stock is strong, "pounding the bid" isn't gonna do a damn thing but get you reamed. The only way hitting the bid makes a difference is if the stock is rising on air! If the fundamentals are there, or the institutions are buying, then that stock is going up, and those who sell are just handing over their money and giving buyers that much of a better price! The way you talk, you'd think each daytrader had the power of Goldman Sachs.
"Doing a legitamite conversion on an exchange is no better if the purpose is to pound bids. Those days are over. Learn to trade. Learn to offer short at the appropriate time. " You have clearly bought into the government sanctioned bias towards going long. Scalping is a legitimate form of TRADING. If a stock is running up, I buy offers, if the stock is running down, I sell bids. If you want to go long stock, is it necessary to "bid at the appropriate time"? I guess you never go long by taking the ask, huh? If I want to buy half a million shares of stock and do so by ripping offers all the way, there is no SEC regulation to stop me from doing so. Likewise, there should be no restriction on how aggressively I choose to sell bids when going short. At some point, someone will step in and absorb the selling pressure in the same way buying pressure is absorbed. The uptick rule was created in the '30s to prevent relentless short selling during a market crash. The futures don't have an uptick rule, and they don't trade to zero during catastrophic events. Bullets provided an opprtunity to level the playing field, where one could go short or long equivalently. The fact that market makers and specialists have never been restricted by an uptick rule is criminal. Common sense would tell you that if a stock is falling, there are going to be no upticks, and nobody is buying offers. How should one go about getting short in such a situation? Those who claim that the ruling did not come about from daytraders nailing bids when stocks were hit with bad news, or other selling pressure need to face reality. Forward conversions and bullets have been around for a long time but only in the last couple of years did instant bullets become commonplace. With the increasing ease with which traders were able to go short, market makers took notice. Market makers and specialists did not like that they didn't have the edge any more. Several years ago when the firm I was at was one of the first to offer instant bullets, it was amazing how easy it was to get the best fills because everyone else was trying in vain to hit upticks or get taken on the offer. This is like being in a gunfight where you are equipped with a machine gun, and your enemies have 6-shot revolvers. Would you give up that edge and allow everyone to have automatic weapons? Market makers want this advantage for themselves, and now they have it. While forward conversions do have some risk of having the long shares called away, and are thus not quite as risk free as married puts, the SEC clearly mentioned that they felt that conversions were also illegal. Any firm that allows the use of conversions will likely have the SEC crawling up their asses. As such, REAL equities trading(going long and short with no bias, or impediments) is dead.
I second the motion to have a downtick rule on all but the most liquid 300 stocks to protect against bubbles.
You are clueless. How long have you've been trading? Just because traders pound bids, its manipulating? So, if I start taking the offers and the offer lifts, that's manipulating too?? Its no different. Traders buy and sell and sell and buy. That is not manipulating. What about the futures markets? Are futures traders who hit bids doing some illegal manipulation? NO, its called trading. If the market is weak, you short. That's called good trading.
so is this true or not? another elite member pm'ed me the same info. i thought it was a "set in stone" rule that the specialist could only buy on a downtick and sell on an uptick. if this is not the case then i am pissed and it is a BIG DEAL!!!!
Manipulation works both ways, buying and selling. Read the regs. Traders buy and sell all the time. I agree. Duh. The question remains, "Is that trader trying to get the best price for himself or worst?" The futures markets have a totally different set of regulations. But I assume you know that.
Don, in not so many words, then why is it not such a big deal. Please hit that one out of the park, not just a base hit. What I mean, is, yes, bullets were just one tool in the arsenal, however, what else are being used or relied upon that makes losing it, not such a big deal. PM me on this if the answer sees to give away too much trade secret. Also feel free to use this question to answer in a way that: 1) reconfirms to your traders and the competitors traders just why they're still at it 2) woo wouild be traders to sign up