Editorial Commentary
Day Traders Benefit the Public
December 6, 1998
Submitted by: Anonymous Day Trader
www.thewebinvestor.com
Over the past few weeks, there have been articles bashing the profession of Day Trading in the Wall Street Journal, Associated press, other publications, as well as on CNBC.
I am a Day Trader. This is my chosen profession. Everyday I risk my capital to make the markets more efficient. Thanks to professional Day Traders, the spreads of NASDAQ stocks have been reduced greatly in the past few years and continue to be reduced as the ranks of professional Day Traders grow. This benefits the public tremendously.
For years, as documented by the SEC lawsuits against the NASD broker/dealers, these broker dealers abuse the dual trading authority that they have. There are very few exchanges that allow dual representation by Market Makers. This dual representation allows these NASD broker/dealers to represent clients with orders and trade for their own accounts in front of these orders. The public does not understand the NASDAQ dealer marketplace and the abuses that this system permits.
Despite new Order Handling rules that require a broker/dealer to post a better market in 30 seconds, I can post a better inside market in seconds. I get reports on my screen in seconds, while clients of other brokerage firms have to wait minutes.
It really bothers me that Mr.. Pastnernack from Nite securities whose firm pays brokers rebates and payment for order flow, goes on CNBC and criticizes Day Traders. Many firms like Schwab, Herzog, Madoff, and others offer this payment for order flow. How do you think firms offer $8.00 commissions? How do you think firms offer commission-less? Thanks to Day Traders, the amount that these firms pay for order flow is decreasing and I hope it goes away. Again, this will benefit the entire public, regardless of how they trade.
The SEC and the exchanges, including NASDAQ has started to trade in sixteenths. I wish I could show these critics of Day Traders how the NASDAQ Market Makers continue to defy the SEC lawsuit and purposely keep spreads wide and refuse to post inside markets in sixteenths. Much of this criticism has come from trading the Internet stocks. Please let the SEC investigate why the NASDAQ Market Makers will keep a 2-point spread in a stock like YHOO. If it was not for Day Traders using ECN's (Electronic Crossing Networks), the public would be paying a much larger spread in any transaction than they now do.
Why doesn't the SEC, CNBC and Wall Street Journal investigate the order fills that are given to the retail public during the market opening. You will see two traders that put in market orders get filled a full point apart with the buyer paying one point higher and the seller getting one point lower at the same firm. Why doesn't CNBC investigate the brokerage industry and stop these abuses. A broker is supposed to represent the client, not exploit him.
The NASDAQ SOES system allows a Market Maker to wait 15 seconds before refreshing his posted bid or offer. My bids and offers are subject to immediate execution and I do not get 15 seconds to decide if I will fill an order. The Market Makers still have the ability to trade for themselves on Selectnet, a broker only network where better bids and offers are not shown to the public. Selectnet is not necessary in today's electronic marketplace. All orders on any network should be displayed to the public.
The press should be looking into manipulation of the markets by Market Makers and insiders and not the beneficial part that Day Traders take in the market place.
The press should be looking into why the NYSE does not permit ECN's and I have to wait for some specialist that controls the posting and execution of trades to post my improved limit order.
Let CNBC and the Wall Street Journal investigate the mechanics of the market system and not the people that are trying to improve the markets for everyone. They never will, because the people are the ones buying their advertising space and continue to treat the public as fools spreading false stories and acting in the best interest of the brokers and not the public.
Market Makers and Specialists, working down at a stock exchange operate their business in the same way as a Day Trader. The profession of Market Maker or Specialist is not denounced the way that the press has attacked Day Traders.
Day Traders benefit the public. Like any profession or business, the proficient ones will profit and succeed, while the bad traders will fail and lose money. People can gamble and do gamble in the stock market. A gambler in the stock market will surely lose his money. This is true if he does it in Day Trading or trading for a week, month or year.
Anyone that trades any active NASDAQ stock, should every day be thankful for Day Traders. Everyday, we save you millions of dollars in better fills.
Sincerely,
Anonymous
Day Trader |
