Gene,
Perhaps you missed my point. You make it sound as if I am begging the question "What are the ECN's so upset about?"
Actually, I could not tell from your message whether you were for or against the position being taken by the ECNs by choosing not to be active participants. My reply was not directed at your position, but rather expressed my views about how I perceive what is going on in these proposals.
I appreciate your posts and informative input, though sometimes I feel you view anything I write as adversarial. I wouldn't be here posting if this were the case. I am here to learn as much as anyone else.
Well, don't feel that way. Adversarial I mean. In fact it seems that we are in relatively close agreement on most of these recent issues. If I sound adversarial toward MMs, or have expressed a "dislike" for them, perhaps that is because the context of this back and forth is always the specific issues rather than a big picture. I am not about to write a long philosophical statement, but in a nutshell let me state what I object to.
I object to the response of the market establishment to the improved market access the public finally achieved following the catastrophic failure of the establishment to serve the needs of the public in 1987, and the "blame" directed at the public for the consequences of that response. That has several manifestations that I won't go into here, but yeah, it tends to show through in some of my views on issues. I object to rules that permit advantages given for a legitimate market making function being used to trade without regard to the responsibilities to maintain an orderly market.
As for the issue of costs to MMs for accessing ECNs all I can say is so what? The establishment had the power and the time to come up with a system that would do what the ECNs have achieved. They shot themselves in the foot by not doing it before somebody else did. ECNs do not make a market, so of course they charge a fee. Nobody ever was or ever will be expected to provide the service of bringing together buyers and sellers for free. MMs had that exclusive position at one time, and they lost it because of poor business decisions they collectively made that have enabled the ECNs to get into the game and flourish. Mistakes are costly sometimes. We all know that.
Perhaps you could elaborate on the circumstance where you say you are obligated to lose money on a trade. Maybe it is the time of day, or insufficient understanding of the MM's obligations, but I'm not following that. Even I don't think you should be forced to lose money by a rule that requires you to execute a trade at a loss. If you are talking about something other than a rule.. like pressure to execute a trade for your customer to keep their business, then that is another issue.
NASDAQ has given the option to ALL participants regarding how one views ECN pricing included in the montage. Thus you can opt not to see pricing with ECN fees or with these charges factored in.
The question is, where do the ECNs fit in the priority of execution? Does the option to display or not display the fee in any way alter the inferior standing of an ECN quoting stock at the same price as an MM because of the fee being included in the price?
If you are going to have order handling rules (which I 100% agree with), you can't have it both ways. If I have to compete with an offering and take stock to fill a customer limit order I should NOT have to lose money on all of these trades (if you have to pay 1/32 on 5000 shares why should the market maker lose $156.25 in ECN fees?). Say what you want about how you feel about market makers (you have made it quite clear your 'dislike'), do you really think they should lose money on all limit orders?
Perhaps you could elaborate on this circumstance where you say you are obligated to lose money on a trade. Maybe it is the time of day, or insufficient understanding of the MMs obligations, but I'm not following that. Even I don't think you should be forced to lose money by a rule that requires you to execute a trade at a loss. If you are talking about something other than a rule.. like pressure to execute a trade for your customer to keep their business, then that is another issue.
Dan |
