|
|
|
|
|
|
|
The rules that followed the Brady Commission recommendations not only mandated the participation in SOES by all market makers, but also increased the market makers' duty to honor their markets. In order to increase market liquidity and the level of investor confidence, the new rules compelled each market maker to increase its SOES participation to five times the minimum SOES obligation size, which in most cases was 1000 shares. If a market marker was offering Apple at 40, that market maker could get SOESed for 1000 shares five times in a row. The Brady Commission felt that this enhanced level of liquidity was necessary to restore the public's confidence in the market. |
|
|
|
|
|
|
|
|
When SOES became mandatory, more market makers began to feel the obligation to honor their markets. Their markets became electronically real and binding, and the market makers could no longer arbitrarily pick and choose which orders they would honor. The SOES shoe began to pinch. Real, firm, and accessible price quotations ignited the market-maker campaign of public outcry. Electronic execution scared the market makers who were witnessing the beginning of the end of their exclusive way of trading. Needless to say, the market makers, who had been SOESed up to five times simultaneously, were angry. I don't mean that they were slightly upset or moderately concerned. They were becoming embittered. The all-powerful market makers went running for relief to their friends who sat on the Trading Committee of the NASD. Immediately, the NASD made SOES trading its highest concerna Level 1 priority. SOES, a system designed by the industry to execute small trades efficiently, was in fact strengthened by the crash, was now growing, and ultimately became the catalyst that would irreparably alter the fabric of the market. |
|
|
|
|
|
|
|
|
I was a real rebel when it came to the old boy system on Wall Street. You can't be warm, fuzzy, and cozy when you represent the forces of change and accountability. The industry wanted to put me out of business because I dared to introduce SOES and computerization to the general public and dared to train John Q. Public in the art of SOES in the attempt to make trading a mainstream occupation. |
|
|
|
|
|