Q&A
Since You Asked
| Professional trader Don Bright of Bright Trading,
an equity trading corporation, answers a few of your questions. |
Don Bright of Bright Trading
|
MARKET MAKERS AND SYMBOLS
First, I want to thank you for your efforts in educating new traders.
I've reviewed some of the information available at the NYSE and NASDAQ
websites. There's a ton of material to learn from, but I still haven't
figured out where to find the symbols representing exchange members or
how to trace their end-of-day trading activities.
Second, I have to confess that I speak as a naive equity trader from
home with a three- to five-day perspective. I am trying to figure out the
rules and participants on the playing field(s). Who are these players,
what are they doing, what does it mean? What are some of the intermarket
relationships (for example, WRT futures)?
You sometimes refer to "market maker." I am sure that many
readers would appreciate having a better understanding of who the different
market makers or participants are, and how individual investors or traders
should interpret their actions. Also, I would appreciate knowing where
I could find timely information (preferably on the web) on what the major
market makers such as exchange members are buying and selling. -Kurbanis
Said
You can find the symbols at http://www.nasdaqtrader.com/trader/symboldirectory/symbol.stm.
Your reference to "end-of-day trading activities" is confusing
to me. I guess you are hoping to get a daily recap of who did what. This
information is not available from the exchanges, and even if it were, it
would not be helpful. The reason is that many trading firms are also retail
brokerages who trade with and against their customers (depending on market
conditions), and professional firms like ours do not disseminate that information
for obvious reasons.
You can find out what the "giveups" are from the New York
Stock Exchange (NYSE). For example, SLK = Spear, Leeds, and Kellogg (our
clearing firm), but they also clear for many members. Again, this information
alone is not of much value.
You probably will not be able to find the net market maker positions
since public filled orders are generally reported on the tape, but this
may not reflect firm orders that were filled.
To really find out how all this works may take some real training not
available via the usual sources. The training that we offer at Bright Trading
is aimed more toward those who really want to trade for a living and become
licensed professionals. We do spend a full segment on "Players of
the Game," but even after knowing who they are, it takes a good six
months before you will be able to comfortably identify them by reading
the tape.
It appears you are asking good questions but expecting different answers.
There is not, and will not, be a way to track successful traders in the
hope of duplicating their methodologies. Two different (successful) traders
will respond differently to the same set of circumstances (if that were
not so, then there would not be a true "marketplace.") Through
education and experience you will be able to put techniques into use that
will enhance your abilities, but if it were possible to duplicate successful
responses to market conditions, then we would simply have a bank of traders
doing the same things. This, of course, would not work, since when you
are actually trading - not paper trading - what you do affects the
market and changes it.
The good people at STOCKS & COMMODITIES have given me the go-ahead
to write a market maker story, and you will see it soon. In addition, we
are planning to do a "2002 World Tour," which will go to several
cities to provide a low-cost, educational introduction to serious, reality-based
trading. Thanks for the questions, and keep reading!
TRADING ON SEVERAL EXCHANGES
Can the same company trade on many stock exchanges? This question
may have been asked before, but I can't find a suitable answer. What I
want to know is: Can a company like Ford trade on two different stock exchanges?
If so, does the price on one exchange affect the price on the other in
a direct correlation? Is it possible (not does it happen) that a company
can have one million shares worth $10 on the NYSE and have another million
worth $10 on the London exchange? If this were the case, could you pick
and choose which stock exchange to buy your shares from? I am interested
in the dynamics of a large company, but I have no knowledge of the fiscal
world. Can you explain? - John McGinty
The company itself is usually listed on the primary exchange (NYSE in
your example). The shares can be traded by any regional exchange as well.
For example, as of this writing I see the following quotes (bid prices)
for Ford Motor Co.: NYSE, 65.75; Boston SE, 65.68; Chicago SE, 65.68; NASD,
65.58; and so forth. The shares can also be traded on one of several electronic
communication networks (ECNs - Island, Inca, Arca, and so on) at the same
or different prices. It is possible to take advantage of pricing disparities
between exchanges but don't count on it, since they are all linked electronically.
There are wheels in motion to direct customer orders to the "best
price" - but not quite yet, I think.
Your question about the "worth" of the company as it relates
to stock price does not relate to which exchange the shares are being traded
on. You must simply find out the number of shares issued that are outstanding
and multiply that times the current price to determine market valuation.
Think of it like this: You hold 500 shares of stock in Ford Motor. You
could offer 100 shares for sale at five different locations. If you directed
their sale to be a market order, you might receive five different prices.
The primary market (listing exchange) is the price you should rely on.
Hope this helps.
Don Bright is with Bright Trading (www.stocktrading.com), a professional
equity corporation with offices around the US. E-mail your questions for
Bright to Editor@Traders.com, with the subject line direct to "Don
Bright Question."
Originally published in the January 2002 issue of Technical
Analysis of STOCKS & COMMODITIES magazine. All rights reserved. ©
Copyright 2001, Technical Analysis, Inc.
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