The Final Frontier - Online Remote Trading Message Board

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Strategies & Market Trends : The Final Frontier - Online Remote Trading

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To: Eric P who wrote (11318)	8/8/2004 4:52:20 PM
From: TheStockStalker	of 12617

Here is a rule that is killing me and allowing some real fleecing by the specialist. sec.gov "The three cent de minimis exemption allows ITS participants and their members to execute transactions, through automated execution or otherwise, without attempting to access the quotes of other participants when the expected price improvement would not be "significant". In providing the three cent de minimis exemption, the Commission believed that, on balance, exempting the specified transactions from the ITS trade-through provisions would provide investors increased liquidity and expand the choice of execution venues, while limiting the possibility that investors would receive significantly inferior prices." Case in point. One of the account I trade is thru a regular discount broker. It is a backup account. If I put in a trade for 15000 QQQ for sale while the current inside bid is 33.20 I will 80% of the time get a fill at 33.17 , since according to the rule above, this "would not be significant" and that they do not even have to look at the best bid if they can fill me within 3 cents of what it was at the time. I can literally "feel the laughter" from the specialist. This trade ends up costing me 450 dollars and when I am ready to exit, if it is a losing trade requiring me to mkt out, I then lose another 450 bux on the exit. All totally legal and done every day. Just read the tape on the QQQ and you will see the oddball prints coming through all the time. Another thing I see is the AMEX bid 3 to 4 cents lower than the inside offer and 3 to 4 cents over the inside bid. Some brokers route to the AMEX exclusively and as a result, the AMEX specialist bids outside the mkt and when an order comes in they simply take out the offer and then print the tape at their bid price to the investor/trader that put in the order. Free money.... This does not happen on the electronic traded Nasdaq unless you are on a direct access system and screw up the routing yourself or do it on purpose.. You get the inside price. Other problem I have had or seen is when I offer out some QQQ and I get represented by a small regional exchange. I literally watch everyone trade through me and my order does not get filled if price reverses even though my order sat there the whole time. SO basically the mantra you hear about "getting the best price" though not the "best speed" is a partially self sacrificing (the speed part) attempt to fool people into thinking they are getting the best price. The reality is that in a transaction that is done between 3 participants in a manual fashion, you will always get the the same and very likely worse price and at horrible speeds of execution as compared to a 2 party electronic order book. Just look how many times you do not get the improved pricing from a regional when you try to buy a stock on NYSE. And then there is the ordeal of trying to short a stock on an exchange!!!! Why a few seconds on Naz and forever (unless it is bout to rip) on Exhanges?? Cuz it is the specialist's pie and he does not want to share the juicy part of it with ya. But this is a whole other subject. Oz

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