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While I wouldn't say the [Forbes] article was totally inaccurate, I
would say that it has a very favorable spin to the subject. Forbes
apparently has a beef with NASDAQ (so do I), but I wish they wouldn't
let that prevent them from presenting an objective portrayal of the
issue.
This reminds me of the article about Block Trading in Inc magazine
which got me started into this field. It was spun extremely favorably.
What I have learned so far is that execution is everything and that
the Island, though remarkable and most welcome in principal, is not a
panacea. One must really understand marketmaking in order to use it
successfully. A MM knows that the most likely time his bid is going
to be hit is when the stock is going DOWN. Therefore, if you want to
be filled, you must buy the selling. It takes strong hands to trade
that way.
The utopia of SOES was the it forced mandatory executions of up to
1000 shares (etc. etc. this is not intended to be a full legal
description) but in real life you just might not get filled. The most
probable reason is that there is a queue of people all trying to force
the same MM(s)to trade at their posted quote and the rules say that
they only have to do it once every 20 seconds!! Again, SOES is an
idea that is roughly attractive in principal, and occasionally useful.
Another nagging feeling that I can't shake is that the NASDAQ really
has no integrity. Consider a futures trader standing in the pit
offering to buy at x. When you tell him, "sold!," he says,
"Nevermind." This is, I think, the way much NASDAQ trading takes
place. You try to execute a MM's bid or offer and he simply pulls his
quote. If you telephone him, he can hang up on you (it happens). If
you SOES him, he could disappear...(how do WE know how long the queue
is?). I hope there are exceptions.
Finally, there are rumors that MM's have software that pulls them off
their quote if an incoming SOES order is received. This could be
paranoia, but then again...
---richard tobiassen <rtobiass@xxxxxxx> wrote:
>
> there is a nice article on stock daytrading in forbes.this issue
> rich t
> http://www.forbes.com/
>
>
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