Opening GAPS,Stocks, & ' If I were an MM'

[DionysusToast]

Thanks for the info D70. It would indeed be interesting to get the views on the MM/Specialist. The only MM I know is in a different market.

My understanding (and I could be wrong) is that the crossing price is used when market orders exist on the buy and sell side at the open. In this case, the market does not need the specialist/MM to be buyer of last resort. Obviously, this will still be impacted by the inside bid/ask.

MMs certainly can impact price in the short term - you only have to watch a stock going up and UBSS appearing on the inside ask to see that people start pulling their bids for a while. Also - in thinner markets, they move the price around to try to get people interested. If you use L2/T&S then you will see this all the time. Fact is though that there's a lot of people trading and even an MM can't stop a freight train.

I think there's a difference between an MM/Specialist moving the market and an MM/Specialist having to absorb a lot of selling by being buyer of last resort. I think understanding the latter is more important than worrying about an MM moving the price down $3 to hit the stop on a 500 share trade.

There's a few topics running here. So perhaps a recap is necessary:

- Some Gaps are not gaps at all - they are continuations of trading that occurs on the ECNs outside of hours (although ECNs should not be called 'dark pools')
- Some Gaps occur with no overnight trading.
- Crossing prices will set the open price - but as far as I know the open price IS the first print/trade and it is not possible to force someone to pay a price they don't want - hence this is used for market orders at the open.
- It is possible for the Specialist/MM to have to be buyer/seller of last resort
- No Rotschild actually agrees with me but I will probably have to argue with him some more before he agrees that he agrees

Another interesting tidbit about Specialists and them setting the open is here :

http://exchanges.nyse.com/archives/2007/10/open_free.php
Effective November 1, 2007, the New York Stock Exchange (NYSE) will offer free trading to all customers in NYSE securities (excluding ETFs) for market and limit orders executing on the opening price, including Market-On-Open (MOO), Limit-On-Open (LOO) and Good-Til-Cancel (GTC) orders.

In addition, the NYSE recently established a more efficient opening process that allows specialists to automatically open stocks for trading quickly and more efficiently, freeing them up to focus on larger situations with imbalances in an effort to discover the best price. The NYSE has the most liquid opening and a superior process for handling imbalances and facilitating better price discovery. Specialists play a vital role in managing imbalances and establishing the best opening price, including providing additional support to minimize imbalances and avoid unreasonable price variations.

In November, the NYSE will be providing real-time pre-open indicative prices, which will be available both to the NYSE floor community and through the NYSE Alerts data feed. The NYSE plans to offer additional pre-open information in the future.

 

[N Rothschild]

i do agree with your description of a gap in the classical sense. but as i have pointed out, its not really quite like that anymore in the more actively traded stocks. and those exchnages to come under dark pools

 

[N Rothschild]

anyway if you ask me stocks are poitnless for trading

 

[DionysusToast]

i do agree with your description of a gap in the classical sense. but as i have pointed out, its not really quite like that anymore in the more actively traded stocks. and those exchnages to come under dark pools

I do actively trade. What I'll do next week as I am setting up is show just how many actively traded stocks have very little pre-market action and how the bids/offers shape up prior to the open.

The actual open itself is a flurry of trades in most cases. There are some stocks that take a little while longer for their opening print - I will watch one of these more closely. My impression is that this is lack of interest although it could be a Specialist stuck in the loo after a bad curry the evening before.

As for dark pools & ECNs - they are different. ECNs are visible, you see their orders in the book, you see their trades print on T&S as they happen. This is not the case for dark pools - they are quite different. In a dark pool, we don't see their orders or their prints, it really is a 'them and is situation'. Retail trading platforms do not show dark pool activity.

The outside of hours activity we see on these charts is ECN activity not dark pools.

 

[N Rothschild]

well maybe there not i just always considered them as such! i dont even trade stocks so none of this is any concern to me lol