Info, I'm not sure I agree. First, while the "autofill" sounds nifty in theory, when I put in a buy at the inside ask for, say 1K, and the MM has a minimum size showing as 1 (100 shares), I have as yet to experience *once* a situation where my fill looks like: 100 shares, 100 shares and so on until my 1K has been reached. Never. And I've been doing this for a couple of years now. What I get is the first 100, and often nothing more - or another MM or ECN appears, and I get stuff like: the original 100, 290, 375, etc. until maybe I get my 1K.
Second, it kind of nails the MM. Let us imagine he's got 20K to unload. He now can't afford to sit there with a size 1 showing, kicking off traders with 100 share fills, while the price just sits there. That's why they do it - price control. Now, either you get the damn fill if the MM *really* has to unload the 20K - and so it takes fewer traders to eat through his supply (and so he can't break momentum by hitting all 200 traders with 100 shares, rather than 20 traders with 1K, which leaves the rest to push the momentum forward), or he has to adjust the price. This will make the price move a lot faster. Haven't you had this experience, especially between 12 EST and 1:30 PM EST, where one MM sits on the price with almost no movement, and there really is no way to get him to respond to true demand/supply - this happens especially on some of the slower less liquid stocks... so many times I'd be buying/selling a smaller cap stock, and I'm not getting executed for 5 minutes, even though from the T & S I can see that I'm the only order, and there is no trading going on - Manning rules and time limits be damned.
<<On any order entry system it will lead to more partial fills and increased trade time.>>
I don't agree. What will happen is that the MM won't be able to f*** with order size and *price movement*. The price will move much more according to supply/demand, and less due to MM games.
Agreed on the ECN issue. Yes, ECN will be more important, but things are moving in that direction anyway - and the sooner the better from my point of view. The MMs are a necessary evil on less liquid stocks that don't have much ECN exposure, but otherwise I see no reason for MMs.
Cautious thumbs up, IMO. Cautious, because I have my doubts about the practicalities of enforcement, after having seen how routinely MMs disregard already well established rules (especially time limits).
We'll see.
Morgan |
