I agree with your comments on the actual size rule. This rule allows market makers to post any. size they like, not their actual size. Ideally, individual traders would benefit from a true ACTUAL size rule which would ensure that the market maker would have to post their true size needs. Recognizing that this would be a disadvantage to the market makers, I would propose another, more fair option:
1) The market maker would post whatever size they desired.
2) Once hit with an execution(s) at that size, their inside ask (bid) would disappear from the Level II screen, allowing executions at the next level.
3) The market maker would have 17 seconds in which to update their quote, but this would not leave the market 'hostage' to wait for their update, as is currently the case.
4) The market maker could have their own system recognize that their actual size is 10,000 shares, while only quoting 1000 shares. Once executed for the 1000 shares, they would instantly update their quote for another 1000, etc. ==> The point of this is that the MM could show a smaller size than he actually needs, but the market maker could NOT quote a price on Level II for 17 seconds, then walk away from it without filling any additional orders at that price.
-Eric |
