Great point by your colleague ray.I remember when the SHO programme began and like Daniel said the Dow marched all the way to 14,000 historic level with it. Just another blame game issue by people who expect the market to always walk straight up. Thanks.

by tony dey on August 14, 2007 1:39 PM

Ray,

Yeah, this whole uptick thing is crazy. Remember February? Back then the uptick rule was still in place.

Markets go up and down.

Anyway, I think everyone is in agreement that the Hybrid Market is responsible for all this volatility. That's what I tell everyone anyway... :)

-DT

by Dinosaur Trader on August 14, 2007 2:08 PM

Thanks for the comments, Tony and DT. Hey DT, I'm also checking a report that the Hybrid Market is responsible for global warming.

And to think, it used to be the specialists who got blamed for everything.

An update on the "uptick theory" issue: another colleague e-mailed me with a different view. He believes that the uptick rule *did* have something to do with greater volatility, but it wasn't until we had increased automation (via Reg. NMS and Hybrid) that the repeal began to destabilize the market. So his theory is that the repeal of the regulation + greater automation = higher volatility.

Another interesting theory for this discussion. Will let you know if I get more on this.

by Ray Pellecchia on August 14, 2007 4:15 PM

Ray:

A quick technical correction to Daniel's post (the 1000 pilot names were drawn from the Russell 3000) and an additional point on the ability to short without price test constraints before full repeal (ARCA hasn't used a "bid test" for Nasdaq names since March 2003).

As for the automation point, I'd point out that Nasdaq has been automated for some time, yet it hasn't experienced increased volatility to the extent the NYSE has. I'd suggest that as people gain experience with automated NYSE trading and Hybrid itself is improved (better information and automation around opens and closes, allowing upstairs traders to use eQuote, and fixing NYSE's router so that it that accesses reserve orders on away markets), things will improve substantially.

In the meantime, kudos to you and your colleagues and the rest of the exchange community for keeping things humming during the past few weeks trading. The capacity demands have been unprecedented.

by Jamie Selway on August 14, 2007 10:05 PM

Thanks for the comments and the kudos, Jamie. I'm enjoying this conversation. Anyone else care to hold forth?

by Ray Pellecchia on August 15, 2007 6:22 AM

Ray,

We had a discussion on my site about global warming not long ago.

It was agreed that the AMEX is the cause. Too much hot air at that exchange.

Anyway, specialists had their faults, but at least if they moved a stock a full point on 100 shares they were responsible and had to answer for the trade.

The Freaky Hybrid Trades I highlight on my site always stand. "Price corrections" are a thing of the past... the robots answer to no one. That should change.

-DT

by Dinosaur Trader on August 15, 2007 1:10 PM

Mr. Labovitz would be better served to show the data instead of simply dismissing the possibility. The Pilot program was very limited and some (Economist Panel) suggested that the short sellers could have purposely avoided beating up on those stocks seeking the elimination and thus a better future.

The NYSE has access to evaluate the volatility and how short sales are impacting such with the lack of uptick rule. I find it amusing that Mr. Labovitz had the access and never used such emperical data in his debunking.

by Dave on August 15, 2007 6:04 PM

Ray,

A funny thing. I just spoke to a reporter about Dan's comments and the SEC pilot test in general. His comment was, how does an evaluation of a short sale rule [Pilot Test] take place in a bull market and be of any value? "Isn't that like testing anti freeze on a standard day?" As for Dan, the reporter would like to see emperical data as well.

by Dave on August 15, 2007 7:44 PM

Here is a different side to your theory!

by Randy Russell on July 9, 2008 2:18 PM