**OT** for this thread, but NYSE specialist stuff that i think it wicked interesting:
Quick Buck: A little dipsy-doodle on the New York Stock
Exchange that hardly anyone noticed. Late on Monday a
big buyer waded into the market to buy about 100,000
shares of Disney at the close of trading. Facing that kind of
demand, the specialist increased the price of Disney stock
about three bucks, from 107 to 110.
That created a funky "gap" up in the stock price at 4 p.m.
and helped jerk the Dow Jones Industrial Average more
convincingly above 8700. This morning, Disney started
trading as though that late action never occurred. Right from
the opening bell Disney traded at 107 1/2. It didn't do much
better throughout the day.
So here's a little lesson on how a specialist makes a lot of
money. When the market order came in at the end of
Monday, the specialist could've taken the trade at the
current price. To do so, the specialist would've had to short
the stock at the market price, unless the specialist had the
shares in inventory. But instead of doing that, the specialist
sells the stock "up" to the big order. Under Big Board rules,
the specialist can push the price higher by 1/8 every 1,000
shares. So on Monday the specialist shorts the stock at the
gapped-up price, anticipating that Disney will go right back
to where it was when the big market order came in.
Voila, Tuesday morning Disney opens at 107 and change.
The specialist takes in the stock, satisfies the short, and
has a grand old morning. Of course, if Disney kept rocketing
after the aberrant order, the move would look foolish. But on
this day the quick bump-and-back trade made for an
enriching few minutes of action. |
