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I am a futures trader. What are SOES traders and what is the island?
Al Taglavore
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> From: cma <cma@xxxxxxxxxxxxx>
> To: dickj@xxxxxxxx
> Cc: metastock-list@xxxxxxxxxxxxx
> Subject: Re: Stops
> Date: Saturday, September 13, 1997 5:01 PM
>
> Thanks, Dick, for very informative rundown of OTC practices. A couple of
> thoughts on OTC trading.
> 1) My experience even with relatively active stocks that are under
> the new NASDAQ rules is that the market makers routinely ignore my
> improving their market. It often takes a call from my broker to force
> them to show the improved market. These are outright violations of the
> new rules and occur every day in many stocks.
> 2) While SOES traders do exaggerate intra-day swings, they improve
> liquidity and make it tougher for the market-makers to rip-off the
> public with excessively wide spreads. The public has benefited from SOES
> traders who, together with the new rules, have mitigated the
> monopolistic practices of the mainline brokerage marketmakers.
> 3) Question for Dick. Can you have your broker send the order
> directly to the Island so that you can compete directly with the
> marketmaker on the bid or offer? Or any other ideas on how to buy on the
> bid and sell on the offer other than openind and account with
> Datek? Thanks, CMA
>
> Dick Jurgens wrote:
>
> > Hi Jerry,
> >
> > Here's a little info. you might find helpful....Soes traders take a
> > lot
> > of flak for the volatility of the market, and a little credit for
> > adding
> > liquidity....The funny thing is they are able (through ECN's like the
> > Island) to "play" market maker, and buy on the inside market bid, and
> > sell on the inside market ask. So while they tend to help exaggerate
> > price moves, they also provide very healthy competition with
> > traditional
> > brokers/market makers and as a by product, make it possible for lesser
> >
> > mortals like you and I to be able to do the same thing....
> >
> > If you get an account with Datek securities, they hard wire your order
> >
> > directly to the Island (via LAN) and you can actually place a limit
> > order to buy at the best BID price, and if somebody is selling, you
> > can
> > get filled without paying the spread. (Of course, if you're buying and
> >
> > someone else is selling, you may not WANT to get filled, as the price
> > may be headed down <g>)
> >
> > If you have Level 2 Nasdaq screens, or have a friend who does, you can
> >
> > actually "see yourself" come up on the bid with a limit order to buy
> > at
> > the current inside bid price !
> >
> > Of course, Datek has it's own limitations......forget openings and
> > fast
> > market conditions...they just get overloaded (primarily with people
> > trying to use the free real-time quote buttons over and over, I think)
> >
> > But on a stock with a dollar or two spread, this feature can make
> > quite
> > a difference if you have the patience.
> >
> > Plus, if you set strict mental stops, you don't have to "give away"
> > the
> > spread to your downside stop-out point.
> >
> > I've always wondered about the effect of Soesers on T/A though. I
> > spent
> > some time at a large Soes shop in lower Manhattan, and there were
> > 150-200 guys, some of whom were turning 150-200 thousand shares per
> > day
> > (round trips, of course)....The question I've never heard discussed is
> >
> > what this kind of activity does to open,close,high,low,volume based
> > indicators like money flow, A/D, OBV, etc..........Especially if they
> > act as a market maker on one side of the trade, and a retail buy/sell
> >
> > on the other.
> >
> > On Intel, it probably doesn't make much difference, but on a stock
> > with
> > a float of less than 10MM shares ?
> >
> > Food for thought, eh ?
> >
> > Dick
> >
> > P.S. There's no exchange rule against stop loss orders on the
> > Nasdaq....but brokerages like ML and Fidelity don't allow them, I
> > suppose because they got tired of explaining why the stop order was
> > filled at the bottom of a gap down, then the stock closed higher than
> > the fill.......A lot of stocks have left the Nasdaq because of the
> > volatility, only to find their share price gradually declines on
> > less-volatile exchanges.
> >
> > Greatelto@xxxxxxx wrote:
> > >
> > > Hi Dick....
> > >
> > > Well, I guess our approaches to investing in the small and micro
> > stocks are
> > > different. It looks like you follow them very closely with real
> > time quotes.
> > > I invest quite a bit in these stocks but only follow them maybe
> > once during
> > > the day and then only if I am interested in entering a trade.
> > Generally it
> > > is at the end of the day when I check on them. However, this
> > difference (if
> > > it does exist) should not prevent an occassional post that could
> > prove
> > > helpful to either of us.
> > >
> > > It is my belief that the SOES traders should be banned. I think
> > this would
> > > cut down on some of the volatile price movements in the market
> > place.
> > >
> > > Perhaps your comments on the rip-offs that take place are well
> > founded. But
> > > it has been my experience that the traders at the bigger (and
> > better) houses
> > > are more ethical. I currently trade with Merrill Lynch and have not
> >
> > > experienced what you talk about. True, I pay more but they do
> > discount me.
> > > And my executions are respectable and acceptable. However, when I
> > do deal
> > > in a very thinly traded stock, I will use limits only. I may miss
> > it, but I
> > > pick and set the prices I will pay or get. I am studying the
> > possibility of
> > > trading on line....but I don't know yet.
> > >
> > > I do have a question. Since I do not and will never place an active
> > stop
> > > order (well, maybe in the event of absence or sickness), I may be a
> > tidge out
> > > of touch on the latest rules. Obviously, you placed a sell stop on
> > a thinly
> > > traded OTC stock. I did not think you could place an actual stop
> > loss on an
> > > OTC stock. What I am saying is this. Perhaps what you thought was
> > a stop
> > > loss order was entered as a regular sell limit order near the
> > current bid
> > > price and you just got an execution on a straight sell. This
> > thought came to
> > > me after I sent my previous post. Check it out and let me know.
> > >
> > > Jerry
>
>
>
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