cudeco(cdu) trading - representations, page-98

Hi buddy,

Fair comments. Many of us enjoy a dynamic conversation but we have to draw limits. Anybody who is hoping for a story involving nazis, hydraulics or any of that please stop reading my post now as I'm going to try to get back on topic. Also if you don't want to know my thoughts or simply don't want a long read please also don't read any further.

Its not like I don't think that there is anything wrong with the system. There is plenty wrong and I have written much about it personally. I believe stocks are manipulated all the time and CDU is surely no different.

I have views about problems which cause the most angst for retail investors and inbalances which appear to distort the perception of a level playing field. I don't present these as absolute, unquestionable facts but rather the things which I believe impact me and my fellow retail investors unfairly. I won't call anybody a conspirator or a friend of Hitler if they don't agree with me or have other ideas.

The first one is simple. Its minimum parcel size on a single trade. Marketable parcel rules are supposed to keep the minimum transaction size to $500. There are reasonable exceptions to this such as the residue from a partially settled order which may timeout etc. If you are left with $10 worth of stock from a partially settled order you have to be allowed to trade it but these constant streams of $1 orders serve no legitimate purpose in my opinion. It cannot be reasonably claimed that instos / algos needs to trade in such small denominations because if they placed larger orders they would move the market. If a minimum $500 order will move the market then so be it, every one of us has to deal with that so why shouldn't they? I could go on to explain how I believe these small denominations impact the market but I suspect by now everybody has witnessed this.

The second critical issue in my opinion is time to live rules. The fundamental premise of placing an order on market is that the order placer genuinely intends for that order to be matched and subsequently settled. I therefore believe that every order that gets placed should have a minimum time to live before it can be cancelled. This would I believe minimise one of the key unfair advantages gained by those market participants who are in the priveledged position of having their own servers wedged up the bum of the exchange trading systems and bound via fibre optics. If an order is genuine then one must reasonably expect it to be there long enough for other market participants to see it, and if they deem the offer/bid reasonable, time to place their own matching order. Sure, a reasonable debate needs to be had about the actual minimum time to live and exceptions such as those genuine OOPS moments when you realise you entered the wrong stock code or sometime silly like that, but in principal I think a few miniutes seems fair and its easy to monitor the number of times a given participant breaches the rule before taking appropriate action.

Third, trade sequencing should be strict. Under no circumstances should any participant have the ability to see orders of other parties before said orders hit the exchange trading engine and placed in the appropriate bid / offer queue for the relevant stock. Allowing anybody to scan orders before the trading engine has the ability to fully process them would provide the watching party with the ability to see the incoming order, insert their own ahead of it, and in the case of an "at market" order, make the buyer pay more or ensure the seller accepts less.

Fourth, permission and disclosure for stock lending also seems to be a pain point. Shorting stocks may or may not be immoral but I don't have an issue with it as long as my stock isn't being used in the process. I believe that if a persons stock is being lent for any purpose then the owner of that stock should have given their explicit permission for this and it not be some hidden clause in brokerage contracts. Also every time the stock is lent the actual owner should be made aware of this. If we know when and how our stock is used then we can make decisions about the appropriateness of the arrangement and cancel if it necessary.

Fifth, greater visibility of all trading engine data by participants without exorbitents fees. The old saying "information is money" is very true and its common for exchanges to sells different types of data to different market participants. Visibility of the what is going on and the timeliness of the provision of the data differentiates those who can see what is happening from those that just find out long after the event. I'm not suggesting that it should all be available for free but I don't believe it fair to price to detailed stuff such that the vast majority of retail investors simply can't afford to see it.

Sixth, routing clarity. Providers of brokering, stock lending are other market participants representing retail investors should have to provide details about order routing thus providing transparency about where and why orders go to a specific market, including but not limited to the sequence in which the markets are alerted to the order.

Seventh, price setting. While price manipulation is apparently illegal the ability to prove such activities is somewhat difficult. There are practices which appear blatent and these should be defined as such to avoid future ambiguity, facilitate automated detection and minimise the issues with collecting evidence for prosecution. One of these practices I believe is to place small buy orders that result in the last trade price going up while masking the participants actual primary activity of selling more significant parcels into the market. The same in reverse also with placing small sell orders to make the proce look either stable or like it is falling while the particiant is actually acquiring stock in orther larger orders.

Finally, confidentiality of intention. Many of us retail investors are a simple bunch. We don't have private fibre to the exchange and thus can't rely upon our bot training to detect that the poop is heading for the fan so many rely upon mechanisms to declare their intention upfront, such as stop loss settings. There must be strict governence around such information.

Some people will always have more money and thats an advantage. Some people will do more and better research and thats an advantage too. Some are just plain clever and some lucky which is no doubt an advantage also. None of these things are unfair advantages however for if we were all exactly the same none of us could ever make any money doing this. We need to separate the unfair advantages from those advantages in life that just are what they are.