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Strategies & Market Trends : Analysis Class for Beginners
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To: Arthur Tang who wrote (708)2/12/1998 2:07:00 PM
From: Arthur Tang  Read Replies (1) of 1471
 
Small markets and how the markets really intertwine?

Many people who are first time investors, got attracted to internet brokerages because of the low commissions. Many investors have horror stories to tell. It is neither fish or fowl.

NYSE specialists only do 11% of the business. 1987 crash, one or two specialists went out of business. Liquidity was provided by Merrill Lynch and their clearing house function. Most of the trading is done at the full service brokerages, and their trading desks. Have visited them to know the structure and function. The full service brokerages have customers' stocks in street names; so they have stock pool to service all their own customers. These brokerages can borrow from their customers and sell them to you. Then, they have no time limit to return the stocks. All the sales and buying is done in house; unless it is to buy back borrowed stocks from specialists.

Smaller clearing houses have not much stock pool let alone cash pool. they have to depend on specialists and market makers to trade your order with your money in your account(cash pool).

So, when you invest and select brokerages check the size of the clearing house. Not the trading software(they are important), not the minimum account(they are the size of the brokerage customers), not the complaints(most are green horn customers, they do not know the rules, all the rules of the brokerage house, Nasdaq or NYSE or possession is 9/10th of the law).

But if you want to throw your money away, no one will stop you. Go to a financial planner to learn the first thing about investment, before you think you are a wizard in stock trading.
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