Well, welcome Vectra. This is indeed a free forum.
Just be prepared to back your statements up. I am always worried about people flying under 'false colours'. I meant nothing sinister with my comments...I just like to know who the players are and what agenda they may be bringing to the table. I try to always disclose my position and why I feel the way I do.
Aside from the market action today, the buzz on the floor was the fall-out from the meeting several of us had with exchange management yesterday after the close. I asked specifically if the following scenario could occur under the new system: a GTC order offering 10 contracts at $1.00 is in the system. The underlying equity gaps overnight and the intrinsic value of these contracts is now $10. (Hey, just think Cognos or Geac). I asked if once the system is 'open', the fastest finger to enter a buy order at $1.00 would own them, and was told flat out--yes. At $1.00. I looked down the table at the representative from Market Integrity and got a small shrug in response. Do you begin to see how flawed this system is? We cannot even prevent this from happening. Next we moved to a discussion of client priority. While there is an issue of defining who constitutes a 'true' client, for these purposes, i.e. retail orders, it does not pertain. Anyway, we had the truly strange situation where every specialist and order trader in the room was four-square behind priority for true 'client' orders, while the exchange management was saying that it wasn't important, and would cost too much to program the 'off-the-shelf' system they have in mind. Think about it...client priority was the law of the land for the first 130-odd years here in Canada, and was only changed in the equity market because the four pillars came down and they could get away with changing it! It is unseemly, unethical, and illegal under English Common law for your broker to act as agent and principal with a client on a trade, whatever the current 'rules' state. They somehow managed to snooker the OSC on that, and it is a blight on our market. Now they want to bring this to derivatives trading as well, and I think they should be stopped.
Let me take a minute to explain where I'm coming from on this. I am a specialist who works for himself. I have no salary, pension plan, health benefits package, etc. I must trade to eat. I believe the best way to ensure this is to treat any clients who choose to trade in my classes fairly to the best of my ability. I'm not looking for a halo on this--it's just a business decision I made a long time ago. If people are treated fairly they will come back and that is worth far more than any benefit derived from 'sharp' trading practises. It is with some pride that I see my stocks consistently in the top ten in terms of open interest and trading volume. Thus any changes to our market which run counter to the best interests of our clients also runs counter to *my* best interests. The proposed 'order-driven' system, coupled with the planned abolition of client priority truly saddens me. It tells me there is no depth too low for the exchange management to sink to in their myopic zeal to fulfill their agenda to bring in fully-automated derivatives trading. I realise the TSE 'truth squad' will hit the ceiling when they read this, but too bad. You're the ones trying to shit in my nest.
Re: the TSE invoking the 'shot-gun' clause. Heh, heh. They tried this in the early 80's and Montreal handed them their ass. This strikes me as the TSE saying, "hey, let's see what this button does." You never institute a change without having a fully-planned scenario for the various possible outcomes. They have none. And hey, what the hell is CDCC doing with $5.5 million in their coffers? They are a non-profit organisation. All this poor-mouthing going around about how the costs of derivatives trading have to be 'rationalised' (i.e., cut to the bone) is just so much bullshit. The exchange is awash with money.
Venting <off>.
Happy trading.
Porter |
