ANYTHING YOU LEARN AT THIS POINT WILL BE WORTHLESS...
Unfortunately, it looks like NASDAQ is going to try to roll out the new SUPERSOES even before the SEC has closed the re-opened comment period on it.
I have no idea what NASDAQ's motivations would be except that they are starting to feel some tremendous pressure from the ECN's and their lobbying power AGAINST this new system. The ECN's contend that NASDAQ is trying to 'corner the market' with their power and turn NASDAQ into it's own ECN. There are other reasons they are against this as well...for another discussion.
In any event, anything you thought you knew about how to read what MM's are doing will not help you with this new system. Since the daytrading community is under the impression that SUPERSOES is going to be just dandy (foolhardy thinking IMO), there will no longer be a reliable way to judge who is doing what. The whole idea is just throw in your orders and see what you get. Good luck daytraders who have minimal pain tolerance (the ones who think they need to cut losses to 1/4 or 3/8 tops). In my humble opinion small traders are going to be eaten alive under this new system. Did you guys see the max order size to put in queue? NASDAQ has proposed at least the ABILITY to have it potentially hold 999,999 shares in SOES queue for ONE ORDER! When one of the big institutional firms has something to do do you actually think you are going to get stock? SELECTNET has NO liability any longer... So daytraders can't try to BUY ahead of others because MM's are no longer liable. Now, you tell me how fast you think the ISLAND book is going to get smoked level after level knowing this? I would say, with 10,000 daytraders competing for the same minimal liquidity on ISLAND, pretty quickly. MOMENTUM players... the bell tolls for thee.
Don't get me wrong, I think this new system is awful. It offers far too much power to the larger institutional firms to do as they please and I am completely against it. I simply can't believe that the daytrading community with all of it's power and numbers has not seen this system as detrimental to the 'momentum' side of that business.
Maybe I am completely wrong... or I am missing something. My opinion of this new system is that momentum daytraders are going to get whipped around so quickly most of them won't survive the first 6 months under this new system. Intraday charts, IMHO, will look like EKG graphs with volatility NEVER before seen especially in thinner issues. Add decimalization in a few months after that and oh boy! Volatile stocks with penny spreads... Just what every trader needs. God help us...
Call me a cynic... IMHO, only the biggest MM firms and largest traders (with the most pain tolerance) are going to survive. As for the small investor, you tell me if you think he is going to benefit from all this? It remains to be seen...
All the best,
-- Gene |
