Mood Media Share Discussion Threads

[malkie] 24/9/2008 19:11

8trader - so best to just have a moan and do nothing??

We have some proposals and support is growing. if enough of us sign up, we will have some real clout.

The LSE have a reputation to protect, so they may be more receptive than you imagine..

join the campaign - please!!

[8trader] 24/9/2008 19:03

If the mm's keep operating crazy spreads then they will eventually cut
their own throats, more and more people will banish Aim and not touch
the bad spreads and the mm's will do less business and it will escalate
from there, cant see a petition making any difference, all it will do if
it has any success is make more and more mm's pulling out of making a
market in iffy Aim stocks, there's already a few stocks that rely solely
on Winterfloods to make a market and in the likes of stocks like Creightons
they will operate a 0.5-1.5p hence there is very little action all year round.

[malkie] 24/9/2008 18:14

wdurham - some of the info i have regarding DMA conflicts with what you are telling me.

I have been advised that there are "orderly market" issues with smaller illiquid stocks which prohibit DMA and are only supported by the Market Maker system. Ultimately this this is decided by the LSE.

If you know different then i would be most interested to hear....

The procedure for setting NMS I have already dealt with. The system is a laggard and therefore an inefficient as an indicator. It makes no allowances for spikes in volume on transformational news, and is only for the nominal protection of the Market Makers exposure.
By the time the NMS catches up with reality the markets will have often moved on.

I think the end game may well be for everyone having direct market access, but at this stage its one step at a time.

First thing to do is to get the market maker system to address and hopefully deal with its systemic inefficiencies.

The campaign is currently compiling a white paper, which will be presented to the LSE.

[wig123] 24/9/2008 17:54

I see MMs have shafted another PI on NNG this afternoon, spread at 20 bid 30 offer, kind hearted MMs gave .13 on 2.5mill. Very nice of the robbing bggers.

Agree with previous post with regards extending DMA in to the AIM market. Until more regulation and a more level playing field I for one will not be investing in AIM stocks.


wig

[andrbea] 24/9/2008 17:52

my 2 penny worth
listen up Mr Darling.....

increase the broker's commission on a sale by 50% or 100%
the commission on a buy stays the same

effect:

this will make sellers of stock think twice, before selling

people will buy more stocks per month than sell them

thereby creating a buoyant (bullish) market


shorters might even become buyers instead of stock to catch the multiple rises.....

[debaleb] 24/9/2008 17:42

SETS on AIM is as corrupt as all the other systems, the book should be ran by the state or the exchange as a non profit making entity.

Supply and demand should be the only basis for making a share go up or down.

[wdurham] 24/9/2008 17:30

malkie -

If you want to put orders on the order book you need DMA. Without DMA you are stuck with sending your broker to a market maker.

But DMA can't replace the market makers, because the rules require that the market makers are still there on the SETS order book, every day, making firm two way quotes to ensure liquidity in the absence of other orders on the book.

The LSE have no input at all into which stocks are traded via DMA. Only the brokers can decide whether to offer it to their clients. If you mean the the LSE decide whether a stock is traded on SETS, yes, the LSE do decide which stocks are traded on that platform and which remain on SEAQ. Although companies can apply to move from SEAQ to SETS if they wish, and if they meet the criteria, they will be moved.

Rapier -

SETSmm is now all there is. It's all explained on the LSE website. The functionality of permanent 2-way market maker quotes on the book has been extended to the whole LSE order book system, which is now simply known as SETS. The "mm" has been dropped.

I don't know about Interactive Brokers because I didn't check them out, but IDealing charges per fill, on the grounds that every execution attracts the same charge from the LSE, whether it is a full fill or not. If your broker needs 2 or three executions to complete your order, then he pays 2 or 3 times the fee, and IDealing charge on that fee to their client.

What you describe as piddly quantities is not at the market makers' discretion. Every quarter, the LSE reviews the previous 12 months' trades in every stock and adjusts the NMS/EMS if necessary. The rolling 4 x quarter figures are designed to iron out spikes which are not representative of normal trading.

I still maintain that what is needed is the extension of SETS to all AIM stocks, and a much wider selection of brokers offering DMA. That would solve the entire situation without raising any regulatory issues under MiFID or the like, as everything required is already in place.

[malkie] 24/9/2008 17:03

wdurham - I dont see why a DMA system should need to replace the role of market makers, this was never the intention.

Rather, permitting traders to put up their own orders could help those who want to buy or sell above NMS or when Market Makers widen their spreads because they dont want to trade.

Rapier - as far as I know it is the LSE whi decides which AIM stocks they will permit to be traded by DMA.

They take into consideration orderly markets and other considerations.

To be clear, we are talking about the smallest companies, in the most below £20m market cap and in moany cases below £5m

These tiddlers haved the odds stacked well and truly against them most of the time.

[rapier686] 24/9/2008 11:26

The two brokers listed by the LSE offering DMA are IDealing and Interactive Brokers.

As an IB customer I can confirm they charge £6/trade (not per fill) for UK deals. Which I think is lower not 'considerably higher' than PIs are used to.

Also it's not SETS which is drifting down into AIM, but SETSmm. In an illiquid stock you can be best bid/offer for absolutely yonks without getting hit whilst the market makers are doing all the business as O trades (at your price or a miniscule whisker inside). I will agree though that this is because all the other PIs aren't set up with order book access and the MMs still have an effective monopoly.

I wouldn't want an MM's obligations - but that doesn't mean I find their services worth paying an arm and a leg for. Their monopoly stops me directly finding punters on the other side and their price is often only firm in piddly waste-of-time quantities.

[wdurham] 24/9/2008 08:36

malkie -

As requested, putting a comment or two here.

As you know, some of the larger cap stocks on AIM are traded on the SETS system, so for those stocks, investors are not at the mercy of the market makers. The price can be influenced by the MMs buy and sell quotes, but cannot be controlled by them all the while there are non-MM orders on the book.

But the rest of AIM is stuck with SEAQ - whereby prices and spreads are dictated by market makers. SEAQ has many disadvantages. But it does have a few advantages:

1. If an investor wants to buy or sell, he does not have to wait until someone comes along who will match with him, but can buy or sell straight away. The market makers are bound to deal in any size at or under NMS at the yellow strip price. In periods when prices are moving rapidly, they may restrict or suspend electronic trading in a certain stock, which means investors can't buy or sell via the automated online system, but have to communicate directly with their broker in order to deal. But the MMs are obliged by the rules to deal at or under NMS - they can't just say "Sorry, we haven't got any..." or "No we don't want them..."

2. Extended settlement is often available, depending on the broker, although there may be a small premium. This is impossible via an order book system.

3. Dealing charges to your broker are relatively low.

HOWEVER, the big point here is that, even if all stocks were traded via the order book, very few private investors have brokers who will give them direect market access. Those that do have dealing charges which are considerably higher than PIs are used to, because DMA costs money - every deal executed on the order book carries a charge to the broker. The LSE website lists only two brokers who offer DMA for cash deals. The other three only offer derivatives. There may be other brokers who offer DMA - but I did not find any during some (fairly superficial) initial research on the SETS market earlier this year.

So most private investors are still stuck without access to the order book, and have to buy and sell off-book via the broker/MM route as per SEAQ. The yellow strip price still applies, though, so those trading SETS stocks are likely to get better pricing/spreads.

You may be approaching the problem from the wrong end, malkie. The system you advocate already exists, and many liquid or semi liquid AIM stocks are already on the platform. Bit by bit the LSE are extending the range of SETS further down the AIM rankings.

The problem here is direct market access. As I see it, a campaign of this kind should have two objectives:

1. Extend SETS throughout AIM as soon as practicable - which means lobbying the LSE
2. Make DMA available for all - which means ganging up on the brokers

(2) is actually the most important, because without it, (1) is only partially worthwhile.

[malkie] 22/9/2008 15:04

the KTS poll has received some more attention - this time from financialexpress and investegate.com



Market makers manipulate prices and volumes, says survey - but market makers refute this
By Leonora Walters

An online survey relating to the market making and pricing of AIM shares finds that a growing number of investors are unhappy with how they can trade on this market, but market makers argue that this is a function of the market and there is not a viable alternative.


The online poll, which is still live, asks six questions including whether participants wish to see a new way to trade AIM shares that does not totally rely on the current market maker system. The overwhelming majority – 83% - said definitely, while 13% said probably. Only 1% did not want to see a change.

However a market maker said in response: "I cannot think of a better way – when you have illiquid stocks you need a catalyst, and that is what the market maker is. This is the best system for small and micro caps."

James Daly, of the investor centre at TD Waterhouse, said: "An alternative is not viable. With some of these stocks, if there were not market makers there would be no trades. Some stocks only have a few market makers and they are obliged to make a price."



Another question asked if respondents feel some AIM market makers manipulate prices and volumes unfairly. Some 55% of the 1006 respondents believed that this is often the case while 26% said that AIM market makers always manipulate prices and volumes unfairly.

Only 2% of respondents thought that they rarely do this and 15% said they sometimes do this.

In response to the question on whether the spreads shown on AIM stocks are reasonable and encourage investors to trade, the majority – 67% - said rarely, and 29% said sometimes. None of the 1008 respondents said that this was always the case and only 2% said often.

And of the 1004 respondents to the question on whether traders can easily deal in the volume of AIM shares they wish to buy or sell, 44% said sometimes, 25% said rarely and 21% said often.

However market makers feel that these views are unfair. "For a more established stock the spread would be a lot less," said Daly. "A lot of the shares are not being traded so are hard to get hold of, therefore the market makers have to mitigate the risks by widening the spread."

"Wide spreads are more a feature of the actual companies and the number of shares in existence, rather than market makers manipulating prices and volumes unfairly."

He also pointed out the larger AIM stocks, such as Peter Hambro Mining, are liquid and have a good order book trading system.

Another market maker reiterated the point that small stocks with not much in issue are illiquid, in particular AIM companies with market capitalisations of less than around £50m, and also said that wider spreads are necessary to reflect the risk of supply and demand.

He said: "In a bull market we would not get these complaints – the bear market over the last year has made the situation worse. A lot of institutional money has been withdrawn from AIM making it less liquid – in a bull market a lot of money would have gone in."

"This will continue until the markets change."

Or perhaps this should read:

"The market wont change whilst this continues"

dont forget to sign up to the campaign!!

[malkie] 16/9/2008 19:26

someone took 20p for 135k GEM when the bid was 26p - over a barrel with Market Makers the only game in town.

On 10th September 450k SOLG sold at 1p when the bid was 3p.
Same stock sold back into the market over next few days for 2.5p-3p

Market Maker system leaves a lot ot be desired. This isnt "making an orderly market", it is profiteering.

Market makers should not be traders as well as there is a clear conflict of interests.



If you want tighter spreads on small cap AIM stocks and Direct Market access for all then join the campaign!

and please spread the word!

[fairdeal2008] 16/9/2008 17:40

Only 20% Paul - blimey maybe we are having a positive impact on the market makers.

[kent_paul] 16/9/2008 16:46

GPN had a 20% spread today

[fairdeal2008] 16/9/2008 13:50

Folks,

Nearly 1000 people have completed the poll on AIM market makers:



The results are staggering, in that a huge proportion of voters are clearly fed up with the AIM market maker system and want change.

Support us now in the second phase of the campaign by registering on our new website, eloquently entitled



We need as many registrations as possible to present a compelling case to the market & LSE for change. Investors have seen their investments suffer in difficult markets, we dont need market maker spreads and dubious tactics exacerbating the problem any longer. Time for a change.

[malkie] 15/9/2008 12:56

lp - you would think it was that easy wouldn't you!

we are looking into regulatory issues in this respect and also direct market access.

We will present the LSE with a White Paper for their consideration and will give them a time table to work with us on these issues

nothing succeeds like persistence!


thanks for the support!

M

[lucky punter] 15/9/2008 12:08

Well Done Malkie a noble crusade indeed. I have over £250k invested in AIM listed companies and this MM system stinks. Why do they exist?. Do we need them? If I want to sell and you want to buy then a system that puts us in touch through a secure website should be all that is needed. The liquidity will sort itself out through the market forces of supply and demand.
Best of luck Malc

[malkie] 15/9/2008 09:26

We have now moved to this new moderated thread



come and join us - all views welcome!

[malkie] 15/9/2008 09:25

www.killthespread.com is live - you can now sign up to be kept up to date on developments.



If you want tighter spreads on small cap AIM stocks, join our campaign!

and please spread the word!

[abc125] 13/9/2008 15:17

"Why dont you want tighter spreads on AIM shares my friend??"

Good point Malkie....I would have thought all PI's could do with tighter spreads/greater liquidity.....I can't see why people are knocking your campaign.

[malkie] 13/9/2008 14:48

Corby, I am everyones friend. You just dont appreciate me.

Why dont you want tighter spreads on AIM shares my friend??

answer on the other thread please..

[wooden5] 13/9/2008 14:41

well done malkie...get rid of the corruption and mms