Having only whatever partial understanding Levine (I do love how many people here mention him, he makes us all feel smarter for sure) has imparted on me, I really don't get the obsession with these brokers. OF all the seemingly shady things going on with finance, this doesn't really seem that bad...
SEC set to propose rules that would squeeze stock-market middlemen
111–120 of 141 posts
Re: SEC set to propose rules that would squeeze stock-market middlemen
#112Earlier 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…
> With today's tech there is no reason that trades can't be immediate, Liquidity is a good, non-technological reason that we may not want trades to be immediate. Consider how the price is found at market-open: buy and sell orders are batched into the opening auction, then the exchange finds the single price that results in the most matching orders. All execute at that price. Contrast that with the binary, point-in-ti…
I think the frustration that people feel is that they decide to sell at X price, but it doesn't actually sell at X price even though X price was, in fact, a listed price on point of time that the sell order was executed.
For instance, lets say I bought a bunch of stock in ACME for 10 dollars a share on say, Wednesday. Lets then, take for example, I notice there was a huge spike on Monday at 12 PM and suddenly, its 15 dollars a share for say, a few minutes, before going back down to 10, so I execute (or, perhaps smartly, have some automation on the account that auto-executes the sale if its at or above N price). Reasonably, I'd expect to get my 15 dollars a share because I sold within the correct window (you can see the timestamp!).
And yet, this isn't what happens. I remember, quite distinctly, being bitten due to the delay in settlements, where in fact, you end up right back in the 10 dollar a share sale because of the delay. This is why real time access for everyone matters, IMO, because in any other market, you get to buy or sell at the time of point agreed price, right?
Why should stocks be different? Why should only huge institutions be able to execute on point in time pricing?
Disclaimer: Its entirely possible that I'm missing something, but when I raised an issue with the broker (This was in the early 2010s, but I can't remember whom, exactly, I worked with) they pretty much made it clear it was because retail trades were cleared "in bulk" at the "agreed price" not the point in time price the sale was executed, if I recall correctly.
Re: SEC set to propose rules that would squeeze stock-market middlemen
#113Earlier quoted context omitted.
> With today's tech there is no reason that trades can't be immediate, Liquidity is a good, non-technological reason that we may not want trades to be immediate. Consider how the price is found at market-open: buy and sell orders are batched into the opening auction, then the exchange finds the single price that results in the most matching orders. All execute at that price. Contrast that with the binary, point-in-ti…
I think the frustration that people feel is that they decide to sell at X price, but it doesn't actually sell at X price even though X price was, in fact, a listed price on point of time that the sell order was executed. For instance, lets say I bought a bunch of stock in ACME for 10 dollars a share on say, Wednesday. Lets then, take for example, I notice there was a huge spike on Monday at 12 PM and suddenly, its 15…
Delay in settlements shouldn't matter in the case you described, and the specific problem you're describing is solved by using limit orders rather than market orders (of course, the order might not fill in that case but that's the risk you take with using limit orders).
The problem with real time for everyone is that the tech required to do that is complicated and it's not necessary for most people.
Re: SEC set to propose rules that would squeeze stock-market middlemen
#114Earlier quoted context omitted.
I think the frustration that people feel is that they decide to sell at X price, but it doesn't actually sell at X price even though X price was, in fact, a listed price on point of time that the sell order was executed. For instance, lets say I bought a bunch of stock in ACME for 10 dollars a share on say, Wednesday. Lets then, take for example, I notice there was a huge spike on Monday at 12 PM and suddenly, its 15…
Delay in settlements shouldn't matter in the case you described, and the specific problem you're describing is solved by using limit orders rather than market orders (of course, the order might not fill in that case but that's the risk you take with using limit orders). The problem with real time for everyone is that the tech required to do that is complicated and it's not necessary for most people.
its odd to me that the market can arbitrarily decide not to fill a sale at a listed price. I'm still not grasping why that is possible. You'd need to mathematically prove there was no buyer for the stock at X price not to fulfill the sale yes? Thats the only way it makes sense to me, yet I know thats not the case by just looking at the sell volume (there was, in fact, to the best of my knowledge, trades executing buy orders - though in my personal example, it was a few hours where the price was higher then went lower)
Re: SEC set to propose rules that would squeeze stock-market middlemen
#115I had no idea that, until the recent round of “innovation”, the retail investor traded only with other investors in the brokerage consumer list. I always thought the brokerage is just facilitating access to the actual trading desk where the trade is put up for anyone to pick up. Am I right in understanding that Robinhood took this and abused it by turning itself and its customers as the source for high frequency trad…
Pretty much. "Robinhood makes money in a number of ways, notably through a system known as payment for order flow. That is, Robinhood routes its users' orders through a market maker who actually makes the trades and compensates Robinhood for the business at a rate of a fraction of a cent per share." [0] The market maker is usually a big player like Citadel. And with this information, they can front-run the market. [0…
They have to execute at or better than the national best bid and offer so you are getting at or better than the price you'd get if you posted a marketable order to an exchange. I don't see how they are front-running.
Re: SEC set to propose rules that would squeeze stock-market middlemen
#116Earlier quoted context omitted.
Delay in settlements shouldn't matter in the case you described, and the specific problem you're describing is solved by using limit orders rather than market orders (of course, the order might not fill in that case but that's the risk you take with using limit orders). The problem with real time for everyone is that the tech required to do that is complicated and it's not necessary for most people.
its odd to me that the market can arbitrarily decide not to fill a sale at a listed price. I'm still not grasping why that is possible. You'd need to mathematically prove there was no buyer for the stock at X price not to fulfill the sale yes? Thats the only way it makes sense to me, yet I know thats not the case by just looking at the sell volume (there was, in fact, to the best of my knowledge, trades executing buy…
You have your thinking backwards because you're ignoring the need for a counterparty. In order for your sale to happen the market must first find a buyer to match it with (otherwise how could you trade?). There's no need to mathematically prove there isn't some other buyer as the whole point is to match the two.
Limit orders at the same price are filled in FIFO order, and it can be the case that that some limit orders fill while others do not simply because someone was only willing to buy 100 shares at that price and there were 200 available for sale - some sales won't happen.
Re: SEC set to propose rules that would squeeze stock-market middlemen
#117Earlier quoted context omitted.
Pretty much. "Robinhood makes money in a number of ways, notably through a system known as payment for order flow. That is, Robinhood routes its users' orders through a market maker who actually makes the trades and compensates Robinhood for the business at a rate of a fraction of a cent per share." [0] The market maker is usually a big player like Citadel. And with this information, they can front-run the market. [0…
They have to execute at or better than the national best bid and offer so you are getting at or better than the price you'd get if you posted a marketable order to an exchange. I don't see how they are front-running.
Oh yes, the old "They have to execute..."
I'm sure these nice American businesses are complying 100% with this rule.
OTOH, I'm not sure that it's easy/possible to really know what the 'NBBO' is, at any given 'moment'.
Re: SEC set to propose rules that would squeeze stock-market middlemen
#118Earlier quoted context omitted.
Delay in settlements shouldn't matter in the case you described, and the specific problem you're describing is solved by using limit orders rather than market orders (of course, the order might not fill in that case but that's the risk you take with using limit orders). The problem with real time for everyone is that the tech required to do that is complicated and it's not necessary for most people.
its odd to me that the market can arbitrarily decide not to fill a sale at a listed price. I'm still not grasping why that is possible. You'd need to mathematically prove there was no buyer for the stock at X price not to fulfill the sale yes? Thats the only way it makes sense to me, yet I know thats not the case by just looking at the sell volume (there was, in fact, to the best of my knowledge, trades executing buy…
> its odd to me that the market can arbitrarily decide not to fill a sale at a listed price.
You might be misinterpreting what the "listed price" actually is on a stock market. Prices that you see quoted are generally not prices that somebody is offering to sell at; they are the price that the last sale was made at. But that sale has already executed, so you cannot infer that there is someone else still willing to sell at that price. The only way to find out for sure what is available at what price is to place a buy order, and your buy order is not guaranteed to execute immediately because there might not be a matching sell order in the order book; it is not even guaranteed to execute as soon as there is a single matching sell order in the order book. It depends on the type of order and the exchange it is placed on and how orders and trades are reconciled. It's not like going into a store and taking an item to the cashier and buying it at the advertised price.
Re: SEC set to propose rules that would squeeze stock-market middlemen
#119Earlier 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…
I quite agree. It should absolutely be a level playing field for everyone as far as possible.
I worry though we are trying to fix something that isn't really broke.
My first Scott Trade brokerage account years back cost $7 a trade per side Now I pay absolutely nothing. Every trade I make I think about how this probably won't last.
An individual has no problem getting near infinite liquidity on their limit orders with no transaction cost. If someone is getting clipped a tick on a market order, oh well. Don't use a market order.
Re: SEC set to propose rules that would squeeze stock-market middlemen
#120Earlier 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…
Could rules such as order matching within coarse-grained time increments level the playing field ? What would the drawbacks be ?
You first have to define what playing field are we talking about?
The playing field in this context is basically latency arbitrage. Who cares what hedge fund is collecting what alpha?
We live in the most golden age for retail trading. Retail electronic trading inside a Roth is basically perfection for the individual right now. I think people are confusing the market micro structure for the account returns in a bear market.