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SEC set to propose rules that would squeeze stock-market middlemen

wsj.com

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Re: SEC set to propose rules that would squeeze stock-market middlemen

#91

Post by chollida1 »

cturner wrote: post #89
hitpointdrew wrote: post #66

Earlier quoted context omitted.

IMO the whole system needs to be overhauled. With today's tech there is no reason that trades can't be immediate, the fact that it takes 3 days to "settle" a trade is absolutely beyond ridiculous. That and let's also get rid of any special treatment for the investment industry that retail traders don't have (for example as a retail trader, I can trade in the pre or post market but if I do my trades aren't guaranteed…

Multi-day settlement is good for market stability. If there is an error, it gets picked up in clearing. If there is a catastrophe, the regulator can cancel the day's trading. T+2 would be an improvement, but less than that would create new problems. Something the US could do to improve its situation would be to change from end of day novation to novation within five seconds of a trade. This might reduce the amount of…

> T+2 would be an improvement, but less than that would create new problems.

US Cash equities already settle in T+2. Have for some time now. IT did used to be T+3

Re: SEC set to propose rules that would squeeze stock-market middlemen

#92

Post by chollida1 »

hitpointdrew wrote: post #66
seanhunter wrote: post #56

As someone who used to work in execution brokerage, this rule change seems on net to be good news for retail investors and bad only for folks like citadel and robinhood.[1] In the wake of flash crash there was a fair amount of research suggesting that rolling auctions (rather than continuous order matching) are net positive for almost everyone except HFTs who exploit market microstructure. In my view they should also…

IMO the whole system needs to be overhauled. With today's tech there is no reason that trades can't be immediate, the fact that it takes 3 days to "settle" a trade is absolutely beyond ridiculous. That and let's also get rid of any special treatment for the investment industry that retail traders don't have (for example as a retail trader, I can trade in the pre or post market but if I do my trades aren't guaranteed…

> With today's tech there is no reason that trades can't be immediate, the fact that it takes 3 days to "settle" a trade is absolutely beyond ridiculous.

Well good news here for you, trades settle in T+2 and have for some time.

> That and let's also get rid of any special treatment for the investment industry that retail traders don't have

Well that is limited by only the deal you and your broker have. You can send all the complex order types that funds do, you are limited only by your broker.

Trading pre/post market still happens on exchanges so any delay is related to your broker. I can trade in "realtime" from my personal brokerage account with no issue or delay.

Re: SEC set to propose rules that would squeeze stock-market middlemen

#93

Post by IMSAI8080 »

LatteLazy wrote: post #52
svggrfgovgf wrote: post #49

From Levine: "Payment for order flow sort of created the zero-commission retail-brokerage model, but it’s not really necessary anymore. You can run a profitable retail brokerage on net interest margin, without charging for trades at all." So what everyone should be complaining about is not PFOF, but "net interest margin". In other words everyone should be complaining about the brokers not paying enough interest on th…

This confused me at least: do people keep cash in their brokerage accounts? Is this an American thing (limey Brit here). I transfer cash in once I've decided to trade and the brokerage usually holds it for a max of a day or two until the trade actually executes (say I am buying an index fund where orders today are executed tomorrow). The only time there has been cash for longer than that was when I know I needed it (…

I am keeping some cash in my Vanguard account because it's offering a better interest rate than my cash ISA.

Re: SEC set to propose rules that would squeeze stock-market middlemen

#95

Post by thedangler »

rocqua wrote: post #30
CSSer wrote: post #16

The first thing I did was open the article and search for PFOF (Payment for Order Flow). > This proposal would address a controversial practice called payment for order flow, in which some brokers collect rebates for sending customers’ orders to wholesalers. Mr. Gensler has called the practice a conflict of interest and, in past statements, left open the possibility of banning it. The SEC’s best-execution proposal do…

PFOF is not a problem, except that it hurts your pension funds. PFOF needs to be price improvement. Research has been done and it _does_ give price improvement. The main point of PFOF is that high frequency traders have much less risk when trading with single persons than they do trading with big players. They are willing to offer them much better prices than they will offer big players. Suppose there is 10cents diff…

When its used in dark pools and used the internalize orders. I mean, how can a stock have repeat 90% buy to sell ratio for over 2 years and still go down? Makes no sense.

Re: SEC set to propose rules that would squeeze stock-market middlemen

#96

Post by this_user »

thedangler wrote: post #95
rocqua wrote: post #30

Earlier quoted context omitted.

PFOF is not a problem, except that it hurts your pension funds. PFOF needs to be price improvement. Research has been done and it _does_ give price improvement. The main point of PFOF is that high frequency traders have much less risk when trading with single persons than they do trading with big players. They are willing to offer them much better prices than they will offer big players. Suppose there is 10cents diff…

When its used in dark pools and used the internalize orders. I mean, how can a stock have repeat 90% buy to sell ratio for over 2 years and still go down? Makes no sense.

There is no such thing as a "90% buy to sell ratio", because every transaction consists of a buy and an equal-sized sell. You can try to classify each marketable transaction in terms of whether buyers or sellers were more aggressive, but that doesn't tell you anything about the state of the order book and the amount of resting orders that are present. Large portfolio do not unwind their positions by just throwing everything into the market as marketable orders, they put chunk after chunk of it into the order book as resting orders. That can easily drive down the price even if it looks like buyers are more aggressive in terms of marketable orders.

Re: SEC set to propose rules that would squeeze stock-market middlemen

#98

Post by affyboi »

cool_dude85 wrote: post #47
rocqua wrote: post #30

Earlier quoted context omitted.

PFOF is not a problem, except that it hurts your pension funds. PFOF needs to be price improvement. Research has been done and it _does_ give price improvement. The main point of PFOF is that high frequency traders have much less risk when trading with single persons than they do trading with big players. They are willing to offer them much better prices than they will offer big players. Suppose there is 10cents diff…

>Research has been done showing that different brokers split the price advantage differently. Robin hood, IIRC was one the worse side, allocating 80% of price advantage to PFOF, leaving only 20% to the customer. But the customer is still better off than paying the public exchange rate. But why should Robinhood or whoever else get part of the 10 cents that the algo is offering me, the little ol' retail investor? Just…

I mean because you’re using their platform and these are the terms - people have always been free to use other brokers, like the ones that charged commission.

Regulations also mean that you have to get NBBO or better so your fill price is never worse than the market

Re: SEC set to propose rules that would squeeze stock-market middlemen

#99

Post by HWR_14 »

hitpointdrew wrote: post #66
seanhunter wrote: post #56

As someone who used to work in execution brokerage, this rule change seems on net to be good news for retail investors and bad only for folks like citadel and robinhood.[1] In the wake of flash crash there was a fair amount of research suggesting that rolling auctions (rather than continuous order matching) are net positive for almost everyone except HFTs who exploit market microstructure. In my view they should also…

IMO the whole system needs to be overhauled. With today's tech there is no reason that trades can't be immediate, the fact that it takes 3 days to "settle" a trade is absolutely beyond ridiculous. That and let's also get rid of any special treatment for the investment industry that retail traders don't have (for example as a retail trader, I can trade in the pre or post market but if I do my trades aren't guaranteed…

1) AFAIK, big firms also aren't guaranteed to have their trades resolved in any timely manner after hours.

2) What difference does it make how long it takes trades to settle? I tell my broker what I want. They have it show up in my account. Any 3 days for settlement is handled at no cost to me.

Re: SEC set to propose rules that would squeeze stock-market middlemen

#100

Post by CoolGuySteve »

HWR_14 wrote: post #99
hitpointdrew wrote: post #66

Earlier quoted context omitted.

IMO the whole system needs to be overhauled. With today's tech there is no reason that trades can't be immediate, the fact that it takes 3 days to "settle" a trade is absolutely beyond ridiculous. That and let's also get rid of any special treatment for the investment industry that retail traders don't have (for example as a retail trader, I can trade in the pre or post market but if I do my trades aren't guaranteed…

1) AFAIK, big firms also aren't guaranteed to have their trades resolved in any timely manner after hours. 2) What difference does it make how long it takes trades to settle? I tell my broker what I want. They have it show up in my account. Any 3 days for settlement is handled at no cost to me.

You're indirectly paying the float during that settlement period.

There's also a whole clearing industry that you're funding with your fees even though more efficient technologies could mostly eliminate it.

Like yeah, it's fun going to fancy restaurants with your salesperson from the clearing firm, but the only reason they can do that is due to massive amounts of rent-seeking. The more I work in finance, the more I think any high touch sales activity is an indication of a broken/corrupt market.

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