Andrzej,
Thanks for your comments. Please follow through
with an e-mail to <scrocker@tse.com> with any
questions you have about their proposed changes
to the trading rules.
Now, on to market orders. They are a very power-
ful tool available to investors, and should be
treated with respect. Let's take your 50 contract
market order: your broker's trader will enter
the square and ask for the market on XYZ May 30
calls. He will not display anything about size
or buy/sell. Traders in the square, who may be
representing client orders, or traders trading
for their own account, and of course the specialist(s),
will quote their bids/offers. If XYZ May 30s are an
active series, it is possible your trader will be
given a bid or offer better than what is showing
on the board. (This is why it is called an open-
outcry auction market). When the market is estab-
lished your trader will turn to the highest bidder,
$1.10, let's say, and say 'sold you 50 at $1.10'.
That bidder is obliged to buy 10, and is entitled
to buy all 50 if he wishes. Let's say the bidder says
'sold me 20'. Now your trader says XYZ May 30's again
to get the follow-up market. When he gets a new bid,
he says sold you 30, etc., until they are all sold.
A few points to consider: you will always get better
fills on an active series of an active stock than you
will in a dead stock with little interest. Know what the
open interest of the class is, and check how many
contracts of that series have traded today. The higher
the better for both.
Secondly, order traders act for your order solely and
do not "buddy-up" with pro traders. They are subject
to fines/punishment if they divulge info about your
order. Third, as a specilaist, I _need_ your orders
to be treated fairly so you will continue to trade
options in my stocks. As an independent, I need to
trade to eat. Actually, all the pros these days no
longer get salaries, so they need to trade to make
money. A very small minority will be so short-sighted
as to 'ream' an order at the risk of losing on-going
business. Again, check the open interest for a hint
as to where they might be.
This is getting a little long, so I will leave the
rest for another post...delayed quote updates, 'floor
decs' by the stock RT, etc.
Let me just say in closing that this is why I am so
upset by the proposed changes by the TSE...abolishing
client priority, removing the possibility of improved
quotes in response to every order, and more. We don't
want to lower the ethical bar....we have tried very
hard to improve the perception of fairness in our
market (the reality has always been there, believe it
or not!). We never get complaints when the market
moves in favour of a client...only when it moves away,
and the client *thinks* he got screwed. Your order
trader would have complained to the floor governors if
his order didn't get a fill it was entitled to, and
he would have gotten what he deserved. Well, enough.
It's tough to write this with one eye on the Super
Bowl.
Porter
Let me sneak in an ad: I am the specialist in ABX,BCE,N. |
