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Well said. Here is a link to a post on the Qcharts list,
which in turn links to a NASDAQ study. The short version
is tick volume has only increased about 15%.
http://groups.yahoo.com/group/qcharts/message/21092
I agree with Bilo that the NASDAQ would be better off with
nickel ticks though: look at the NQ. IMHO the NQ is the cleanest
market around as far as slippage to range ratios and it trades
in 1/2's....kind of ironic with the big ND trading in 1/10ths and
slipping around like a turtle in a hockey rink.
BW
>From: "Michael Berger" <mberger@xxxxxxxx>
>Reply-To: "Michael Berger" <mberger@xxxxxxxx>
>To: "OmegaList" <omega-list@xxxxxxxxxx>
>Subject: Decimalization
>Date: Wed, 16 May 2001 08:50:08 -0400
>
>
>From a trader's perspective, a few observations on the
>so-called decimalization problems:
>
>1. Beware the logical error: "After this, therefore
>because of this" (I"ll skip the Latin.)
>
> The markets are dealing with an unprecedented bubble.
>The consequences of this are not easy to predict, but one
>thing is that there are going to be far, far fewer traders
>involved. The changes in noise level, choppiness, etc.,
>that you pin on decimalization, are characteristic of almost
>all major (& even minor) changes in trend, in most markets,
>at most times. It is far greater now, partly because of
>massive public participation in the markets, and partly
>because of the nature of the change: a 10-year bubble has
>broken. My guess, even without decimalization, pretty much
>the same characteristics would have occurred.
>
>2. To the extend that decimalization has had a minor
>impact, it will adjust, as all market changes have.
>Remember the massive temporary dislocations with triple
>witch? Markets take a bit of time to adapt, but they do.
>How & when is the trick.
>
>3. While the lack of easy money from daytrading appears to
>be a negative for the daytrader, in the intermediate to
>long-term, it is a major positive for the economy. A nation
>of daytraders is not productive.
>
>Regards,
>
>----- Original Message -----
>From: "Bilo Selhi" <citadel@xxxxxxxxxxxx>
>To: "Neal Falkenberry, CFA" <tnf@xxxxxxxxxxxx>;
><omega-list@xxxxxxxxxx>
>Sent: Tuesday, May 15, 2001 5:12 PM
>Subject: Re: Dual CPUs
>
>
> >
> > > We believe the move to decimalization changed the
>demands on our CPUs
> > with
> > > respect to data collection although we can not prove it.
>Has anyone else
> > > experienced similar problems?
> > >
> > you bet. things changed since the decimalization in
>equities, esp in Naz.
> > short term price volatility increased and noise level went
>up considerably.
> > spreads are now negative many times especially ecn
>spreads.
> > there is pretty good arbitrage opportunities now but only
>for MMs.
> > *actually for mms it became a lot easier to whip
>daytraders by artificial
> > momentum creation. the daytrading edge actually went down
>even more.
> > you can hardly see depth anymore and short supply and
>demand is becoming
> > very one sided. if before you could deal with 1/16 spread
>now you are
> > forced to go outside of the market as much as 10-30 cents.
>basically
> > slippage
> > now doubled :-)
> > the mm's have even better advantage now against the
>daytraders.
> > takes a lot less size now to shake the tree...and works
>faster.
> > markets thinned out in terms of short term trading.
> > i consider it yet another blow to the daytraders.
> >
> > if you looked at csco today after the 3pm major sell, even
>on a 20 dollar
> > tabletop the supply demand was so one sided the stock
>tanked very fast.
> > what happens it that bid side (demand ) evaporates down up
>to 10-40
> > cents.
> > you get a pile up on the offer with hundreds of thousands
>offered and
> > and no one on the bid to support the shit...
> > and remember that it used to be that csco would have some
> > good depth support on both sides... now forget about it.
> > so in terms of program trading for mms it's several times
>easier to run the
> > stock.
> > means it's easier to create panic, easier to manipulate...
>better for them
> > overall.
> >
> > this can only be taken care of if someone proposes a 5
>cent price scale
> > like
> > in futures ) which is forget about it.
> >
> > and on top of that chicago boys are kicking in individual
>futures on stocks
> > which will be even easier to run and manipulate stocks...
>more
> > commissions, more variables to consider, more
>clusterf...ck and more
> > volatility...more noise, with less directional movement.
> >
> > in terms of cpu load, more volatility will create more
>ticks and add to cpu
> > load.
> > in terms of systematic trading, slippage will go up and
>cost low commissions
> > will
> > be offset by high slippage, noise levels will increase on
>low resolutions
> > time frames...
> > overall worse not better...
> >
> > all that unless they invoke the min tick increment of say
>5 cents.
> > then it will stabilize. but the chances of that is next to
>nothing.
> > if it's better for the market makers the chances are it
>will stay that way.
> >
> > bilo.
> > ps. i'd say short term stock daytrading business is
>kaput... or
> > you have to have the machine do it for you.
> >
> >
> >
> >
> >
> >
> >
> >
>
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