Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Final Frontier - Online Remote Trading -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (8809)	3/10/2001 2:24:12 PM
From: LPS5	Read Replies (1) \| Respond to of 12617

Let me clear in responding that while I understand the author's position, and find it full of validity, I think that it's a matter of terrific theory with potentially debilitating shortfalls in its' application. and there will always be the possibility of someone with superior knowledge having the advantage in getting a better deal. In a an auction crossing format, all market participants, whether institutional, retail, etc., put their buy or sell orders in before the cross, with or without a limit price. The cross occurs at a point in time, and the amount of shares done at the clearing price is sent back to the user. For that reason, all orders are treated the exact same - a far more exact way than say, an ECN purporting to offer "equal access to everyone" does. The shortfall, as the author would describe it, in ECNs comes from the "total" tranparency (which in itself is not, in fact, "total") which causes firms to withhold interest for fear of revealing their hand. In a black box, you can say, "I want to buy 500,000 shares at x price or better," and not - as with an ECN - worry about either market impact pushing causing price disadvantages ("runaways") due to informational factors or the time disadvantage resulting from market impact limiting (while not impact eliminating) trading strategies such as time slicing, reserve orders, VWAP, blind bidding, etc. There's no way for the buyer and the seller to interface directly as long as someone has to make the market. The author would agree wholeheartedly, as that statement jives with his speculation on the informational and transparency disadvantages of acting through dealers, exchanges, ECNs, and the like. A crossing network would eliminate the need for dealers or specialists, as the liquidity which they provide in a continuous market setting would be unlocked as institutions, retail investors, proprietary traders, etc. - having not to fear being revealed to other market participants, being seen on the box, or having prices move against them - would submit more, and larger, order interest into the session(s). There's an additional implication to this as well: the reduced ability and/or incentive (causal relationships aside, you be the judge) to manipulate the market in certain issues as a result of reducing the trading process to periodic crossing sessions. LPS5