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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (57792)	12/19/2001 3:45:23 PM
From: Sam Citron	Read Replies (1) \| Respond to of 70976

Under 11AS1-6 order routing disclosure, the system looks like it is much more transparent than it was, and the disclosure penalty has a genuine prophylactic effect IMO. A bigger problem is the foot dragging on the elimination of the nickel spread for <$3 options.

To: Jacob Snyder who wrote (57792)	12/19/2001 3:47:03 PM
From: Gottfried	Read Replies (1) \| Respond to of 70976

Jacob, a few weeks ago Datek credited my account for a payment for order flow they had received! Gottfried

To: Jacob Snyder who wrote (57792)	12/19/2001 4:43:37 PM
From: Sam Citron	Respond to of 70976

OT REG 11AC1 17 CFR 240 - This old comment from MWD on the proposed rule is quite informative (though certainly biased). sec.gov

To: Jacob Snyder who wrote (57792)	12/22/2001 7:14:34 PM
From: Sam Citron	Respond to of 70976

the entire concept of payment for order flow is corrupt Barrons 12/24/01 It's 10 a.m. Do you know where your sell order is being executed? Reviewed by Theresa W. Carey Edited by Randall W. Forsyth Just in time for your yearend reflections, the SEC has implemented rules intended to provide an overview of how brokers handle clients' orders. SEC Exchange Act Rule 11AC1-5 requires market centers -- market makers and securities exchanges -- to report monthly on the speed, price and size of their orders. Rule 11AC1-6 mandates that broker/dealers report quarterly on order- routing practices for U.S. equities (New York Stock Exchange, Nasdaq, American Stock Exchange) and exchange-listed options. A key goal is to eventually build a database that will determine where investors get the most for their trading dollars. Statistics for the third quarter, published in compliance with Rule 1-6, paint a revealing picture of each brokerage. Among the figures provided are those for the major market centers (for instance, exchanges, specialists, market makers and electronic communications networks, or ECNs) that receive 5% or more of a brokerage's orders; payment for order flow arrangements, and percentage of orders by type (market, limit and "other," including short sales). The orders the SEC is most interested in are those considered "non-directed," which are placed when an investor just hits the "trade" button without telling the brokerage to use a particular exchange or ECN. The SEC wants to see how the brokerage handles orders when it's given free rein. Brokerages are required to post this information publicly, though that doesn't mean the link is prominent on their Websites. For instance, to find Charles Schwab's report at www.schwab.com, you must scroll to the bottom of its home page and locate the "SEC Disclosure" link under "Company Information." At Wall Street Access (www.wallstreetaccess.com), you'll have to click on "Trader Education and Resources" and then find "Order Routing" at the bottom of the menu. And the story is much the same at all 15 online brokers whose Websites we examined. One fact leaps out, as Salomon Smith Barney's Guy Moszkowski notes in a report: Brokerages with market-making divisions concentrate their order routing internally. Schwab sent 96% of its Nasdaq orders to Schwab Capital Markets, while Morgan Stanley kept 84% of its trades inhouse. Brokers that don't have internal market makers naturally spread the orders around, but payment for order flow appears to be a factor in their decisions on where to place a trade. Datek sends 89% of its Nasdaq orders to its wholly-owned Island ECN subsidiary. Moszkowski analyzed 11 major brokers. He found that, on average, 44% of their Nasdaq orders during the third quarter were market orders, 39% were limit orders and the remaining 17% were "other." Certain brokerages produced order mixes that differed significantly from the average. Only 16% of the trades placed with Datek were market orders, while Merrill Lynch customers favored market orders 71% of the time. Market centers have been publishing their Rule 1-5 statistics for three months now, with numbers available for August-October. Reports are available for individual ticker symbols. Two problems: First, with the current system, making comparisons isn't easy. Second, the sheer volume of information is too staggering to be easily digested. For the NYSE alone, there are approximately 50 megabytes of data per month to examine. That's an enormous pile of information, and one we're still sorting through. interactive.wsj.com