All,
All this discussion about the relative merits of online trading vs. communication through the phones miss a very important point. The entire NASDAQ market is still pretty much a free for all. It is entirely acceptable to haggle over price. It could be argued, that like in Middle East or South American city markets, only the tourists pay full price.
If the NASDAQ was a single market, with a time stamp on bid/ask/quantity, use of a point-and-click interface would have significant advantages due to speed of execution. Time stamping of the bid and quantity and enforcing this precedence (not allowing trades around or ahead of the system), would provide the ultimate in market transparency. If the market maker needed to buy 10,000 shares of XYZ, he/she would have to reserve a place in line at the price they intended to pay. Otherwise they would not be able to achieve an execution.
However, under the existing system, this same market maker can set his bid 1/8 below the inside spread with a quantity of 1000 and still buy the 10,000 shares at the bid or slightly above, without ever tipping his hand to Level II screens.
Do not forget when debating the relative merits of online trading that all the information is not present electronically. Personal relationships developed over years between the market makers and traders like Steve Goldman, may allow price improvements not available online. Especially for more sizable orders.
Enjoy the ride,
Ira |
