Tallguy1,
Good response, emotional and a bit warranted, but let me reply:
1. You made statements about my blanketed dismissal of market makers etc or online discounters. If you have truly followed this thread for a while, you will know that I think some of these firms offer great services for selective clients. A company like Eschwab, etc. offers research and other tools that is hands-down impressive relative to what was available a few years ago. Some of the firms offer great execution systems if you trade selective markets.
And yes, on many occassions I have also stated the smaller investors is at a cross roads regarding the value of a price improvement relative to cost associated with:
Let me address this:
1. For the smaller investor who needs no advice or guidance, doing 100 shares, this investor is at a cross roads and might well do much better at a deep discounter. Yet, and I mean this with no disrespect although I am sure you will get upset about this, such an investor is usually in search of some guidance and if they are buying 100 shares of that 50 dollar stock you are mentioning, they wont mind paying $10 more to get some guidance, advice, asset allocating, "handholding". etc. Look, I'm a liscensed attorney but wouldnt dream of representing myself at a real estate closing sinceI just don't have the experience. Someone investing hard cash without the experience might do well paying ten bucks more for the additional services.
2. You mentioned some numbers which I think you either made a mistake with or meant something which I missed. You mentioned 1000 shares and a 1/16 price improvement...thats NOT $10 but about $62... As well you are assuming that 1/16 or 1/8 is average. While it would not be representative of an overal picture of what transpires, I could showyou reports from the day after the -559 where we had executions to sell stock 1 and 2 points above the customers limit and there were a lot of them.
3. Question: If a market maker in a stock has your order, are they not trading against you? Are their interests not opposed to yours? Is not an 1/8 in your pocket an 1/8 out of theres? If they gave you an extra 1/16, what do you think they made?
4. Nothing is wrong with order flow compensation when it is done properly and nondiscriminatorily with the CLIENT's best interests in mind. Simply routing 100% of all orders, I feel, is not in the clients best interests.
5. What about situations where you have a buy order, we are trying inbetween on snet for an improvement and the market starts to collapse. We k9ill the selectnet order. The market moves much lower and later we getit for you at 3/8 or 1/2 lower. Do you think the market maker is going to do that? What is their mind set?
Noone is bashing market makers or firms that act as principal. It is their business model. But if you think for a second that that trader, with your ticket to buy 1000 abcd, watching it tank, is going to get you the very bottom, or if you think your best interests are foremost in hismind, then I believe you are mistaken. And if they aren't with you, their against you. Maybe its an 1/8, maybe a 1/4, my point, again,is you never know.
Look, if you have been following this thread, you know I always answer people sincerely and with the poster's best interests in mind. When you read about Morgan Stanley yesterday getting fined $35,000 for giving the client bad executions and you read the reports from a year and a half ago about the SEC censuring the NASDAQ 100million and you read why it came about, and you see what I see each and everyday, I end up not putting to much faith in market makers/principal. Biased....absolutely. I never claimed to be otherwise. This is simply how I feel. I am glad you strongly oppose it.
It creates a worthwhile discussion.
Regards,
Steve@yamner.com |
