[H]itting a $20 bid will never buy any of us a share of stock for $20.
Yes, because hitting a bid is selling stock. Taking an offer would buy stock.
[T]he effect of the scheme proposed by Nasdaq is to give execution priority to dealers by demanding that the FEE charged to access an alternative and often superior execution path be misrepresented as part of the share PRICE.
Misrepresentation? Fees are indeed fees, and stock prices are stock prices, and the issue revolves around the total cost of the execution. Not prices vs. fees, but price plus fees, to disclose the total COST of the transaction.
It has nothing to do with the price they pay for shares of stock.
Obviously. But that isn't the issue at hand. The issue boils down to one of undisclosed fees that impact the total cost of an execution. Sure: most traders know exactly what the fees are on the ECNs they utilize. But, perhaps anticipating more direct access traders - or, maybe seeking to staunch the continuing flow of arbitration cases pertaining to ECNs and access fee charges, who knows? -they've proposed making the costs explicit.
SNET fee + (# of shares*stock price)
vs.
SNET fee + (# of shares*stock price) + (# shares*access fee per share)
It is the ECN/ATS manifestation of a new wave of long overdue disclosure initiatives; essentially, no different than demanding that dealers disclose their order routing policies, such that investors know that their orders can take a few hops before coming to rest on a traders desk: the sum of total potential costs that can impact their orders. And, it bears noting that the order flow disclosure plan will eventually have to be disclosed in a quantitative, performance-oriented, as well as qualitative, manner for investors to review, which may well take the form of an actual per share or dollar amount per order assessment.
The only difference is that ECNs will have to display their total cost per share in a continuous, real-time format reflected in their price whereas dealers' will (at least under the proposal) be released - I believe - quarterly.
Perhaps the plan would be more palatable if the dealers' varying execution performance, in terms of impact, slippage, delay and the like, were reflected in their price quotes on a per share basis? I might go for that, but for the fact that ECN fees are fixed, whereas dealers' execution performance varies with the overall market trend, the type of security, the manner in which they execute the order, etc...all of which make a single number a bit unfair.
Anyway. I'll say this; I prefer this initiative in the form of the integration of the per share amount into the quote more than the version wherein dealers would be put ahead for executions at a certain price level. I'm just more comfortable with it.
LPS5 |
