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forced to print five fills of 1000 shares at its quoted price. Webster's dictionary would have to come up with new terms to describe market-maker reaction to this phenomenon, and the scale of market-maker displeasure would have to be geometric and not linear. Market-maker outrage on any scale was rising. |
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The market makers wanted the right to take a second look and be able to walk away before honoring their obligation to trade, if they so chose. The market makers said that the SOES bandits were too fast and took advantage of information that the market makers didn't know. In point of fact, the SOES traders just saw a trend and went with the flow. |
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Even though Nasdaq was supposed to be a firm market, the market makers naturally wanted to take another look before honoring their price obligations. Come to think of it, so would I. Hindsight is always 20/20 vision. Market makers were anxious to replace SOES with a room-to-maneuver system. The stated purpose of N*PROVE was to replace SOES's immediate automatic execution with an order delivery system. The proposed N*PROVE system allowed a market maker extra seconds to accept or decline an incoming order before the order was executed by the system. |
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N*PROVE was a retrograde step with respect to the liberalization of trading. It was a poor concept that the NASD hoped the SEC would rubber-stamp in a business-as-usual manner. The NASD was counting on SEC accommodation. |
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"SOES ahead!" was a common cry at trading houses that wanted to back away from their firm quote obligation, which was to trade at least 1000 shares at their quoted price. There is a double meaning to the term SOES ahead. The first meaning is that DAET/SOES trading is leading the markets into the future and is growing every day. The second meaning was an excuse used by market makers to avoid making a trade. SOES ahead was an excuse to find a scapegoat. |
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