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Strategies & Market Trends : DAYTRADING Fundamentals
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To: LPS5 who wrote (7633)4/3/2000 12:05:00 AM
From: Dan Clark  Read Replies (1) of 18137
 
LPS5,

Your position and arguments sound quite similar to that proposed by the Nasdaq. Are you associated with Nasdaq, ECN or any Market Maker?

I can imagine that the ECN's don't want this because it makes their service unnecessary.

It turns that CyberCorp has a system very similar to what you propose. It doesn't work very well because of Market Maker antics and/or because it is too slow. By the time the system determines where to send the order, the order price has moved on and your order is not marketable.

Also, for your scenario to work, ALL participants would have to be bound by the same rules - instant execution and price improvement.

One of the most "anemic" arguments is that this would reduce competition. If by "competition", you mean limiting the role of the Market Makers, then yes you are correct. But if you mean the classic definition of "competition" - better products for lower cost - then the argument doesn't hold water.

Trades are a commodity item. It is currently treated as though the Market Makers and big broker/dealers provide added value to the retail investor. The don't really provide added value. If want to buy 100 shares of Microsoft and the current ask is $90, then the purchase price should be $90 per share. The "Product" is the same. The price is the same. But liquidity is spread all over the place.

With the CLOB, trades become more commoditized and therefore lower cost. All traders can know that they can go to one place and get the best price.

Bottom line is that "competition" doesn't mean more middlemen in the marketplace taking their cut. It means lower costs for the investor/trader.

Regards,

Dan.
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