Faster, Cheaper, Dumber: Street Whispers
In the NYSE's proposed RLP system, retail orders would be executed at fractions of pennies - 100 IBM(IBM) shares at say $200.001 instead of $200.01. That's exactly the kind of pricing that high frequency traders enjoy since it allows they to move in and out of positions in milliseconds and at subpenny prices. With access to NYSEs retail order flow, robotic and sophisticated traders will have a whole new menu of liquidity on which to feast.
That is why the new Wall Street war for clients isn't about serving retail giants E-Trade (ETCF) , Charles Schwab (SCHW) and TD Ameritrade(AMTD) with lower prices, but instead about serving up ordinary trades to a shark tank of fast-money traders who've plugged directly into exchanges.
As ordinary equity investors flee stocks because of a loss of confidence in markets after flash crashes have led the likes of Apple(AAPL) above $100,000.00 and Accenture(ACN) , Hewlett Packard(HPQ) and Boston Beer Company(SAM) to pennies, stock market trading is increasingly the domain of quick buck artists.
As a result, exchanges and trading outfits are now focused on gaining the remaining retail or institutional orders to lure in exponentially larger sized HFT trades.
While exchanges, regulators and high frequency trading outfits frame new developments in the structure of stock trading on improvements in pricing, speed and execution, there seems to be little recognition that markets remain on a crash course towards instability and speculation, at the detriment of long-term retail and institutional investors who used to be the fabric of stock trading.
In order to take back market position from ominous dark pools and high frequency exchanges where trading largely goes unregulated, NYSE Euronext's seemingly well-intentioned efforts to bring those trading practices to retail investors - backed on a "trial basis" by the Securities and Exchange Commission -- are likely to be overwhelmed by benefits to speculators.
-- Written by Antoine Gara in New York