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From my own experience of transition from open outcry to electronic
trading, as a floortrader/broker. It is really better and fairer to the public
clients fills. Because in the open outcry system,the quotation at the board is
just a reference depending on price reporters industriousness,in a very large
pit, there will be many different price transactions going on at the same
time,so the quoted price is just a reference because in that "exact time"
actual price is already a little change. This is only feasible for those big or
important clients of the real professional brokers only, who can handhold their
clients, but what about everybody else? And us technicians usually recquire
precise
price entries and exits as much as possible, you know, otherwise it will be
harder for technical
analysis to make money for us.
While in electronic trading everybody (possibly around the world)will be
seeing the lowest seller and highest buyer at the same time, and can decide to
hit either instantly. It is not feasible and realistic or necessary for all
traders in the whole world to have their own trading and executing terminal,
(cause this is expensive,unless your trading volume justifies it.)for executing
their own trade at home or at the office, what everyone should have is just
REAL live quotation, and they have to still use telephone or (maybe internet)
tell their broker to execute what is seen live at the terminal. because these
will be too big a network to maintain and manage. As a client of an electronic
exchange , your execution is recorded as your own account in the exchange's
computer, not somebody else or trading account of broker and this cannot be
changed, unlike in the outcry approach, we now will have electronic paper
trail, this willkeep your broker honest and make some dishonest ones unhappy.
Now I am beginning to understand why 90%+ of all traders lost money, even
with some promising systems or methods because one major factor is the quality
of the "fills", unlike in stock exchanges where the majority of the public is
making money, because their brokers ARE professionals who just execute. This
might help explain why with the same system or method,
different people make money and others lose.
The world is getting smaller because of the internet, soon traders around
the world will have better
choices to trade on whatever exchanges is out their which give their potential
clients a fairer shake. I pray one day all brokers be doing what they should be
doing in the first place. If they are lynching
Mr. Leo Melamed,(he is quite a visionary) for doing what is right, now you can
understand why there are people who crucified Jesus or burned Joan of Arc. Just
protecting their interest, or making a dirty buck.
Anyway eventually the public will smarten up and abandon even boycott the
outcry exchanges( after they wake up and grown sick and tired) and let those
soon to become mini trading floor with their dwindling floor traders play among
themselves. I can't imagine an outcry trading floor with a capacity
example of 3,000 people to become for example 10,000 people, that is chaos, and
not a freely
traded market anymore and price will be inefficient, the quotations will be,
the price at the south end of the pit is.... , while the price at the center is
changing hands at another price, and the west part of the pit is..... and then
this pit will grow and grow even bigger in the future? Boy, you should need a
very good broker who loves you like a brother and is REALLY motivated, that is
, if you are a prefered client.
As for the so called "liquidity" being provided by the floortrader, that just a
license to steal. In electronic trading there is also liquidity but from a lot
more players around the world with the computer lining up the best bids, so we
will all get better prices, and not be robbed. Do you mean
if I pay all the exchange fees and become a floor trader I can legally steal
from the public, wow,
this is neat!
The only potential problem, w/c I have experienced in electronic trading is
that the system (computer
network) will hang due to overwhelming volume, this will put all trading to a
halt(this really happens
quite a lot), or some crazy madman or computer hackers might sabotages it. So
the exchanges should plan for these contigencies, like a parallel non-stop
backup-backbone system and (modular likecapacity that can grow as the time
comes) accomodate extreme market situations,at least up to 10 times average
daily volume, so that when this happens, things will still be smooth and the
world
will be such a beautiful place for us public traders.
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