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Michael,
Even on systems where you can see the whole order book you cannot
effectively compete because the traders either do not give all
information into the system or they give wrong information into the
system.
Either way no one wants to show his hand - who would ?
I have seen the workings of the SEAQ system in London. When
you wanted to move large amounts of stock you could not just hit the
market makers. When you tried to do this then they would just price
away from you without you having moved any size.
Every broker would first of all call his own clients before giving
anything into the market. Only if his own clients don't want to
do something he would go into the market. But even then he will try
to have some private words with large traders.
So knowledgable players deal anywhere but at the spread. And
you can even do this with the market maker. You tell him what you
want him to do and give him the chance to lean on the correct side
and cut him in on the deal.
There is no way to find this out while this is happening.
And I remember one day where we really hit the market makers with
large amounts of stock. After we had unloaded the position to one
particular market maker who always had the tightest spread he phoned
us and explained that he was in deep shit. He asked us to take part
of the trades back. And you know what: We did cancel 4 out 5 trades
just to be able to deal with that guy again in the future.
Of course I do not want to generalize and I believe that some markets
like the DTB/Xetra are already pretty efficient but the methods stay
the same. It is well known that the traders put fake orders into the
market to cap or support positions. When the market gets there they
just pull the order.
Whatever system is out there. It is not in the interest of others to
cut you in on the deal.
Gerrit Jacobsen
http://www.tickscape.com
> someone/some house buying S&P Globex very tightly. Because the
> mmakers don't need to show both sides the last trade changed 5 times
> for every one change in the bid. Business was being done up to 2-3
> points above the bid price ! (In my view a sure sign that someone''s
> loading up on the long side) Now if the Mmakers were made to show
> both sides you could see more effectively from the spread that they
> were buying everything - which is exactly what the makers don't
> want. In addition as the trading developed I would say the
> spread at times was up to 2/3 big points which would give any other
> trader an opportunity to take a point in the middle with a
> (moderate) risk if the offers were posted.
>
> My problem is this - if its electronic both sides should be
> displayed, afterall we pay the CME the fees for only half the
> information. This am I spoke to CME London to try and get an
> answer and I was assured that the VP of equity mkting at the CME
> would call me but of course I have heard nothing. Disabling fee
> paying customers from mkt info just to give mmakers an edge sucks.
> This is a two speed electronic mkt, some are making a living by just
> getting out of bed.
>
>
>
> >Good question. I concurr with your inqiury. Anybody got an answer?
> >Al
> >
> >----------
> >> From: Michael Stewart <MPST@xxxxxxxxxxxxx>
> >> To: Omega <omega-list@xxxxxxxxxx>
> >> Subject: Globex S&P and emini
> >> Date: Friday, August 28, 1998 9:33 AM
> >>
> >>
> >> Anybody any ideas why offers are not shown on S&P and emini globex ?
> >Are
> >> marketmakers only required to show half a hand? And why if you sell via
> >> your broker doesn't your order appear on the screen even though it
> >appears
> >> on the brokers screen?
> >>
> >> Sort of defeats the object of a transparent electronic market or is it
> >> another technical problem??
> >>
> >>
> >>
> >>
>
>
>
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