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Strategies & Market Trends : Rande Is . . . HOME -- Ignore unavailable to you. Want to Upgrade?

To: xcr600 who wrote (5709)	4/17/1999 8:31:00 PM
From: Rande Is	Respond to of 57584

TRADING AND MARKET CONDITIONS [cut and pasted from a post stating it was taken from the J.B. Oxford site] In recent months, the market has experienced a dramatic increase in price volatility and volume, particularly in stocks involving companies that sell products or services via the internet. Customers eager to trade in fast moving issues have flooded their brokers with large numbers of orders, and have even affected the way the marketplace performs. You should be aware of the way this change impacts your trading, and the risks it represents for you as an investor. Deep discount commissions and internet order entry have enabled investors to trade at a pace never before seen by the industry. As the volume has increased, market makers have found it necessary to take unusual steps in order to manage their risk in the marketplace, particularly in situations where one-sided orderflow results in dramatic imbalances. As the flow of orders reaches market maker capacity, order execution firms routinely disable normal automatic execution systems, resorting to manual executions which result in delays in order execution. Delays in execution can result in orders being filled at prices that are in some cases significantly different from the expected price, often outstripping the investor's ability to pay. If you intend to participate in these markets, it is important that you take steps to protect yourself from unwanted surprises. Entering Orders One way you can control your trading risk is by entering limit orders rather than market orders. Market orders are required to be filled in their entirety at the prevailing bid or offer, and you have no way to control the level at which you may be filled in a fast moving market. A limit order allows you to specify a maximum or minimum price you will accept. The risk of a limit order is that your order may not be filled at all, generally a more acceptable hazard than the price exposure of a market order. One area that has proven particularly dangerous for market orders has been Initial Public Offering's (IPO) first day of trading in the secondary market. Investors unable to acquire shares of hot issues on the offering have bid these issues to astronomical levels, often far beyond any rational valuation. Delays As market maker firms switch to manual executions and reduce their size guarantees, order queues swell into major backlogs. Quotes that are being displayed to the public begin to lag behind the actual trading prices, and trade reports may arrive long after the actual execution. These delays can lead to situations in which a purchaser is not sure that he owns the stock, even as the stock is moving against him. By the time a report is received, the investor has locked in a significant loss, with no opportunity to take protective action. Access In times of intense volatility, investors may have difficulty reaching their investment firm. Difficulty in accessing online accounts may result from high internet traffic or other sources. The sudden influx of clients attempting to reach their broker by telephone may also result in significant delays in placing orders, resulting in losses. JB Oxford & Company has increased its system capacity to handle approximately twice its average daily internet volume. We can not guarantee, however, that the system will not be the subject of the infrequent breakdowns to which any electronic system is prone. Cancellations Order cancellations and changes are always subject to prior execution. These orders are matched manually and are subject to delay. Execution of your order following receipt of a cancellation, but prior to being matched to the order is considered to be "too-late-to-cancel". It is the policy of JB Oxford & Company that any order for which we have received a cancellation order and that has been reported back as cancelled, will stand as cancelled, even if the order may have been entitled to an execution. In actively traded issues, it may be difficult, if not impossible to change or cancel a market order. Entering a cancel order and a separate replacement order may result in a duplicate execution. This should always be done as a "modify" order. Margin Because of the volatility of certain issues, it may be necessary to increase the maintenance requirement for certain issues without prior notice. This protects both our customers and the firm by ensuring that there is sufficient equity to cover wide swings in stock values, and reduces the likelihood of forced liquidations to meet margin calls. There may even be situations in which JB Oxford & Company is unwilling to lend against certain issues, even though the security has been approved for margin by the Federal Reserve Bank.