Looks like we're out to get screwed:
>>Bloomberg News
JERSEY CITY - Large market makers are causing delays for investors trying to make on-line trades because they periodically remove certain Internet stocks from automatic execution systems, industry executives said.
They are executing trades by hand because, they say, they can't commit too much capital to balance the waves of trades sent their way by one-line brokerages in fast moving stocks like Amazon.com Inc and Yahoo Inc. As a result, online brokerages and their customers last week reported delays as long as 15 minutes in execution of trades.
Manual execution "works for us, but it slows up the entire process" said E E Geduld Inc, the No. 3 Market maker in Nasdaq stocks.
Market Makers match buyers and sellers, often guaranteeing to make trades at listed prices by using their own money to buy and sell. With booming Internet trading, stock prices can change by dozens of points in minutes, putting market makers at risk.
"You can't get yourself in a position where your're buying literally tens of thousands of shares and you have to pay up 20 or 30 points in a metter of seconds," Geduld said. "Firms can go out of business playing that game."
Knight/Trimark Group Inc of Jersey City, the biggest market maker on the Nasdaq Stock Market, on Wednesday removed about a dozen Internet stocks, from its computerized execution system several times for about 15 minutes, said Ken Pasternak, president and chief executive. Trades were executed manually.
On-line brokerages execute their customer's Nasdaq trades through market makers like Knight. Such trades are bunched together and buyers and sellers are matched electronically, with final execution often coming through market makers systems.
Knight has systems that signal its traders if itgets orders for more than 10,000 shares of a stock in a volitale market.
After executing the first 10,000 shares, Knight will try to balance the remaining orders, though it won't guarantee to takes shares for its own account.<<
Excuse any typos please. I can't believe this practice is allowed by the SEC knowing full well it is the small individuals that are being "put a risk." These delays far exceeded "15 minutes" and since you can't sell a stock that you don't even know you own, this is a deliberate attempt to screw the little guy. |
