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Non-Tech : Bid /Ask Spreads - Market Manipulation
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To: Sajjad who wrote (197)11/10/1996 2:04:00 AM
From: Steve   of 308
 
Let me enlighten you a little on the subjects in question.

Level III terminals differ from level II in that they allow quote movement(i.e. market making), further, they have access to all selectnet bids and offers put on the system by both principals and agents. Level III has nothing to do with showing a better B/A other than the viewing of selectnets, and the subsequent participation in those bids and offers. In short, level III terminals are purely market making instruments.

SOES was a creation of NASDAQ following the 87 debacle where market makers refused to answer phones or honor their markets. It was put in place to protect the small investor in illiquid markets. SOES Bandits are professional traders who use the system to "pick off" market makers electronically. What they do is not wrong or illegal, per se, but they do have an unfair advantage of both market makers and regular investors. If you have ever had trouble getting an order executed in a fast market it is more likely the fault of SOES Bandits rather than market makers.

Instinet is available to anyone Reuters deems worthy of it (and who is able to put up the million or two in collateral). Instinet, in most cases, represents the truest and most liquid market for NASDAQ issues. For NYSE stocks it is a much different story. There it is mostly used for after hours trading.

In a few short months, when the new SEC policies are put into place, NASDAQ markets will more truly display the inside market.

Hope this helped some.

From someone who has been there.
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