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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: $Mogul who wrote (13216)	6/18/2001 1:12:13 AM
From: Eric P	Read Replies (2) \| Respond to of 18137

Interesting final quote by Putnum: "The second element is decimalization. Not that I have anything against specialists, but it appears from the early returns that a pretty profitable business just got that much better. Our clients are finding that a listed ECN provides them with a means to effectively compete with the floor. On Archipelago, if you cancel an order you get a fast out, and no one on our system gets a 15- or 30-second break to decide if they should step ahead of you by a penny to intercept the right kind of market order flow. It's just a cleaner model in which everyone knows the ground rules. I've noticed this myself in the post decimalization days. While exchange specialists, by rule, have never been able to fill an order for themselves in front of a customer order at the same price on their book. Historically, this has left the specialist with two options: Fill the incoming marketable order from the book, or price improve the incoming marketable order by at least 1/16 in order to fill the order internally for the specialists' account. This seemed to be a fair balance. If the specialist wanted to step in front of client orders on his book, he had to offer at least a $0.0625 price improvement in order to do so. Currently, however, with decimaliztion, the specialist can step in front of orders on his book by only providing a $0.01 price improvement. While I've never been a big NYSE trader, and lack the extensive NYSE experience of many others, I have been frustrated by this problem since decimaliztion. More and more, it appears that the specialist will step in front of our client limit orders on the book to provide price improvement of a penny, preventing book orders from being filled, unless the stock is due to move sharply in the wrong direction! Anyone else notice this more often after decimaliztion? -Eric