joseph,
This sort of activity on Nasdaq is, IMHO, a totally different situation from what we were talking about on the options exchanges. The options exchanges really do have a system of matching traders quotes with greater size. Nasdaq has gone out of their way to protect their dealers from this obligation.
In a recent case, the SEC alleged that day trader Robert Monski entered a limit order to buy 100 shares at $5.81, which was above the best Nasdaq buy price of $5.06. That order was displayed nationally on Nasdaq, and dealers were required to honor it.
Monski then sold 500 shares at this $5.81 price, making 76 cents a share more than he would have, the SEC said. He withdrew his smaller 100-share buy order before anyone offered to sell stock at that price, and the national buy price fell back to $5.06, the SEC said.
This is way off base if you ask me.. I know nobody is asking me. In the first place, why in the world is there a Nasdaq stock trading at $5.06 with a spread in excess of $.75 (please, let's do the arithmetic right)? That's a spread of over 14%. The SEC and NASD ought to be all over the registered MMs in that security for failing to make a legitimate market. Secondly, what dealers are required to honor the bid posted by the trader? No dealer in a Nasdaq security is obligated to post a quote in excess of the size of a clients order, and they are never required to match the best price on an ECN. Whoever sold him 500 shares at the elevated price did so because they wanted to, not because they were required to. Furthermore, while the trader's bid was out there he was fully at risk of being filled and buying another 100 shares at that higher price. When Nasdaq imposes a rule that says every time somebody posts a quote at the inside they must allow it to be filled unless the market moves past them, then there will be a legitimate basis for coming down on "spoofing". If this is fraud, then every Nasdaq MM who ever lived is a criminal.
Dan |
