Hi Matthew L. Jones; Re those direct access brokerage accounts versus brokers with a conflict of interest...
There are sometimes stocks that a direct access user can watch the level-2 on, but that he cannot purchase or sell using his direct access account. He can then send an order into a regular broker, and see how it gets filled.
There are some brokers that are quite fair, I am fond of Charles Schwab and Freeman Wellwood (sp?), in particular. They won't try and use your order as a backstop, and they will give you okay execution &c. (But most people could do a better job themselves, most of the time. The one exception to this is when you are trying to make the spread. For some reason, it is easier for the market makers (like MASH) to make the spread than it is for the ISLD.)
As an example, a trader puts an order in to buy 2000 shares of a stupid bulletin board stock for 7/8 through a regular broker. The ask is also 7/8, so the broker should simply clean up the shares at the ask, and then place a bid at 7/8 for the remaining shares. Instead, the broker places a limit order to buy just above the bid, intending on making the spread (for himself). The direct access trader then has to call up the broker and make him do what was asked.
Observing an instance or two of the above will give you an idea of how the retail brokers make their money. Another place where they make life tough for you is in markets that are running. They just can't fill your order then, but if you were direct, you could fill it (though maybe not at the price you would like...)
-- Carl |
