Haywood, The old saw has always been that the Nasdaq market is as crooked as the Snake River, but it is the only game in town for most small cap and mid cap stocks. That is why I had a laugh back a couple of years ago when NASD put out notices on how they were going to monitor advice given over the Internet and slap down miscreants. Sort of like Al Capone cleaning up Cleveland the way he made Chicago honest. -g-
But there are big variations in Nasdaq stock trading. If you are trading something like Microsoft or Intel through a reputable broker (an oxymoron?), you are probably getting as high a quality trade execution as you would on the NYSE. If you are trading something smaller, you are probably seeing inflated volume and spreads that you could drive a truck through and a manipulated stock price. NYSE specialists are not my favorite people, but unlike the guy who wrote "The Wall Street Jungle," I do not consider them the embodiment of evil.
Both specialists and market makers have huge advantages over the public and even over institutional traders. The big difference is that the specialists also have a responsibility that the market makers seem able to walk away from at will. The specialist is both the buyer and the seller of last resort, and I have seen some of these guys take major hickeys performing that role. In the long run, I would much rather be on the side of Speer, Leeds, a major specialist firm, than against them, but, in the short run, even they can get caught in a stampede. And unlike you or me or Nasdaq market makers, they have to eventually stand up say, "hey, I'm going the other way."
I don't believe any Nasdaq traders on Wall Street are hurting by the nature of their market making. True, there are now so many stocks that some will be undermarketed, but these guys still make a ton trading this stuff. All the whining is an attempt to get the SOES Bandits shut down, as they hurt profit margins and force dealers to stand behind their posted bids and offers. How dare they keep dealers honest, even if it is only one deal at a time? -g- I remember when I was trading large blocks, the bids and offers over the Autex System were supposed to be binding. But I found most of the were GTC, Good Til Called. -g- They really put out those bids and offers most of the time as a way to fish for institutions that are on one side or another of a market. The first question you ask as a buyside trader is, "Is it a real market?" In other words, is there really something on the other side. And if your sales trader values your business, he usually tells you the truth.
So, I think we will see each trader handling fewer names, as the Soes Bandits force then to actually pay attention. But others will simply take their place.
My take on the Amex merger is that the Nasdaq is tech lopsided while the Amex is resources lopsided. Both can use the other's strength in the battle against the NYSE.
BTW, in options, the specialists exchanges almost always kick the butt of market maker exchanges when they trade the same issue. Customers seem to recognize what is an inherently superior system. It isn't democratic, but specialists deliver better prices for the public. MB |
