Vadym:
Your comments regarding the new SuperSOES system:
1. Amount of shares available at any given price still remains the same.
2. This amount of shares will be exhausted more quickly because of decreased time period between fills and because of immediate executions against reserve size.
It means that prices are going to change faster. Risk is going to be perceived as increased. It might lead to even less liquidity as market participants might want to decrease their risk exposure.
I would add that the spreads for stocks should be expected to increase, which actually should also be a good thing for traders who primarily use limit orders. Unfortunately, more and more traders have been forced to rely on limit orders as market makers have withdrawn from their prior liquidity providing function.
I think we could all greatly benefit from extensive discussions on the effects of the new SuperSOES system in the next month before the 6/5/00 implementation date. Those who quickly learn the best tactics for the new system will reap the rewards.
With the new system, I think 'real' market makers will be much easier to determine. A market maker who is truly in the market buying or selling shares in size will now be forced to quote 1000 shares.
Conversely, the 'fake' market makers will be forced to cease and desist. They will no longer be able to post 100 shares and sit on the inside ask for extended periods of time. With the new system, their 100 share offer will be quickly eaten up, and they will be automatically booted from the inside ask.
I think fancy order routing systems will become much less important, unless the ECN's fail to participate in this new system. This is a plus for the trader, as their success and failure will be more dependant on their trading ideas and less dependant on their execution choices and finger speed.
Anyway, I'd encourage us all to do some extensive thought regarding the effects and new strategies which will be important for this new trading execution system. It should dramatically affect the way Nasdaq stocks are traded... and it's only one month away. Let's get up to speed, fast, so we're most comfortable when the change occurs.
Thoughts, anyone?
-Eric
P.S. For those who may still be looking for the links, go to post #8000 on this thread for the links to a very good presentation on the workings of this new system. I'm going to go back and hear it a second time now, maybe more will sink in... |
