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trading at an inferior price. ''Trading though" is a violation of current NASD regulations and is reportedly a regulation that will be enforced. |
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In addition, the instantaneous nature in which new competitive quotations from any trading entity can be placed into an ECN for display on Nasdaq makes it more difficult for a market maker to artificially move the price of a stock because a new quote with additional size can pop up virtually at any time, defeating the strategy employed by that market maker. |
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ECNs can help or hurt any trading entity trying to orchestrate a market move. The ECNs have made true market depth an unknown factor in that new orders can be placed immediately, preventing market makers' ability to gap stocks short term. Previously, market makers used to move prices n the moments it took to display additional size or improved prices. |
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These factors with the soon-to-be-adopted decimal pricing will further decrease spreads and make wiggles, jiggles, and head fakes potentially far more costly and uncertain to those trying to create them. Head fakes will be reduced because the SEC and NASD are watching and take a dim view of collusion. Also, telephone calls in trading departments are being monitored on a continuing basis. Firms will have a greater interest in not exposing themselves to penalties because of the greed of any single trader. |
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Since the publishing of my last book, market makers have finally accepted the reality that Direct Access Electronic Trading exists now and is here to stay. This realization has already caused all market makers to change their trading style and techniques. A trader should not agonize when turning over positions actively. If DAET traders stay liquid and nimble, they will put themselves in the path of profit. Some people become suspicious when I advise them to trade actively, aggressively, and often. Suspicious people feel that because I own a brokerage firm, it is in my best interest to advise people to trade often. While it is true that the trading fees I charge customers fuel my business, it is also true that my most active traders are also those traders reaping the most profits. Fluid |
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