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Thoughts On The "Trade-At" Rule: Exploring The Hidden Costs Of Price Improvement

Tyler Durden's picture

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Tue, 04/19/2011 - 10:30 | 1183777 Misean
Misean's picture

Yeah, but how would someone be able to skim effectively.

Tue, 04/19/2011 - 11:26 | 1184083 disabledvet
disabledvet's picture

i agree "the point should be to provide more liquidity, not less."

Tue, 04/19/2011 - 10:48 | 1183857 Mercury
Mercury's picture

It should be obvious at this point that innovations intended to help/protect the retail investor are disproportionally favoring  institutional traders and fragmenting market structure beyond the comprehension of most retail investors.  Low commissions are nice but beyond that the trade-offs and unintended consequences involved in recent market structure changes aren't very appealing.

Re-centralize the marketplace and bring back the dominance of the CLOB and the NBBO.

Tue, 04/19/2011 - 10:52 | 1183890 Azannoth
Azannoth's picture

Why not ban sup-penny trading, or at least 0.1 of a penny, that would solve many problems

Tue, 04/19/2011 - 11:12 | 1184009 ZeroPower
ZeroPower's picture

On the ultra liquid names with sufficient volume backed up at a particular level, you'll get your fill from a DP which gets these half penny or tenth increment pricings. Essentially they can come in between the big board spread and offer/take liquidity.

Tue, 04/19/2011 - 13:39 | 1184792 CPL
CPL's picture

ETF's would be vapourized the same day with a trade at rule.


Reading between the lines on this, it's just another play to remove retail traders fromt he arena altogether.

Tue, 04/19/2011 - 15:21 | 1185218 ZeroPower
ZeroPower's picture

The big boys need retail to 1) sell at the top to; and 2) buy at the bottom from.

Tue, 04/19/2011 - 11:04 | 1183977 FreakuentFlyer
FreakuentFlyer's picture

i really appreciated this article.


on the other side of the "penny", one could ask why should we "protect" the "freedom" of retail investors to effectively manage their own executions while we tell these same persons which drugs they are or not allowed to get without a prescription.

Tue, 04/19/2011 - 11:26 | 1184084 Jus7tme
Jus7tme's picture

Isn't "Price Improvement" just legalized frontrunning where the broker/market maker pockets most of the difference between the current price and a customer limit order that just happens to be higher than the current quoted price (for whatever reason)?


Shouldn't the rule instead be that the customer should get the best price possible, rathern than having the broker stepping in between?





Tue, 04/19/2011 - 11:32 | 1184106 disabledvet
disabledvet's picture

a more interesting commentary would be adding this article to "the takeover talks over NYSE/Euronext."  Unlike "other markets" where you might not ever need to "post the collateral of cash" I hear "the NYSE doesn't really like those types of rules."  Go figure.

Tue, 04/19/2011 - 12:59 | 1184596 RonnieColeman
RonnieColeman's picture

not to mention all the HFTs who pull liquidity when you place a bid at whatever the offer is. There have been so many times when theres plenty of shares on the offer and I'll match the offer with a bid for a small amount of shares that should get filled and only get filled for a small portion of the total. Pretty frustrating

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