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The Power Of The Order Clerk |
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On Wall Street, the position of an order clerk is usually considered a relatively modest job. No one studies at the Wharton School of Finance to become an order clerk. However, the order clerk is, in some instances, in a position of tremendous power because trading desks have remarkable latitude concerning how, where, and when orders are executed. This ability to handle orders can put order clerks in an advantageous position to make money for many market makers at the customers' expense. These orders can spell awesome profits to market makers if such orders are handled in a "friendly" manner with respect to the execution time and/or price. |
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Timing of executions is very important. One telling example occurred to a student in my training program who owned about 4000 shares of Yahoo, which had risen to $42 a share. Our student had not yet opened a DAET account and was trying to sell through conventional brokerage firms without utilizing SOES. He ended up selling half of his stock at $33 and the remainder at $32 a share. Almost 10 points of value had evaporated in the execution process, all in the hands of an order clerk. The moral of this situation is when business is transacted over the telephone, there are no records of when the order is received relative to when the order is executed. Seconds do count. |
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The order clerks have the latitude to allow the market makers not to honor their market. With DAET, order clerk juggling cannot happen because execution of the trade is automatic and occurs without human intervention. DAET executions tend to be immediate, while e-mail or telephone orders may be delayed upon execution. |
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The discount brokerage firm can readily ignore a customer complaint and favor the market maker. If you complain, the trading desk wins. The trading desk earns more income each year from the contra-side market maker than you usually generate in commission income to the firm. In the discount brokerage firm's mind, no one has any reason to grumble, especially you. The clerk on the desk is being wined, the |
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