IPOs Present Opportunity to Stock Traders

IPOs have been slowly increasing since the lowest number in 2008 of only 35 newly introduced company stock during the Great Recession.  2014 saw the largest capital raised with 291 completed IPOs raising a record 96 billion, but only 112 in 2016 with just $21b raised.  Although the IPO market has been slow the last couple of years, the first half of 2017 is seeing a slight increase with 91 completed deals. The upswing in 2017 of the number of IPOs creates opportunities for traders, although it can still be tricky to earn decent returns in the current environment.  IPOs can be risky business for an individual investor as it can be difficult to predict how new stock will perform when introduced and trading begins.   Most IPOs are experiencing a transition period which makes their future value a bit uncertain and there is no historical data to compare to.  

Even though the number has been increasing, the return are not necessarily following suit.  2017 has seen returns on IPOs averaging only 10.6%, which is the 2nd worst performance for a 6-month period since 1995.  To explain this decrease in performance we must evaluate the change in the structure of today’s typical IPO, which has had a profound effect on returns.    

Today’s IPO is Larger and More Stable

The profile of today’s IPOs has changed dramatically in the last few years, as companies wait until they are much larger to go public than they would have in the past.  The median deal size has increased from $82 million in Q1 2016 to $190 million in Q2 2017.   IPOs are raising more money than they ever have in the past, and are more stable when deciding to go public.  

When these companies choose to go public they are stable with defined revenue streams and completely functioning management teams.   The stability of the IPOs today allows them to command a higher market cap than companies without that proven track record.   There is less volatility and less chance for bigger returns for traders with more visibility on valuation.

It takes traders with experience and willingness to do the research to earn the returns on IPOs that we saw in the past.  Great Point Capital is a team of experienced traders with in-depth knowledge of all market opportunities.  

Great Point Capital is a member of FINRA, serving the trading community since 2001.   Our mission is to be the leader in the equity day trading community by giving the best traders the tools and support to make the most of their trading careers.  Contact Great Point Capital, LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results.

Pro Trading Firm Has Broad Order Type Availability

You may not be aware that a professional trading firm can replace your online broker, bringing you bigger better returns at a lower cost to you.   Out of convenience, or just lack of resources, we fall to the comfort of trading with an online broker like E-Trade or Ameritrade, but there are actually much better options.  

With lower commission, faster execution for a better quality of trade, and more order types to choose from, you owe it to yourself to see how Great Point Capital can replace your online broker.

  

Directed Orders

You are probably not aware that most online brokers sell your orders to the highest bidder, which is also called “payment for order flow”.  Payment for order flow, (POF), is a widespread arrangement that has been around for quite some time in US Markets.  POF is an arrangement where a third-party firm pays the online brokers to send orders to them, instead of to the open market.  

With professional trading firms, you can direct your order however you like.  See if your online broker allows you to do any of these:

• Put your order only into dark pools, to minimize market impact
• Split your order among multiple liquidity pools, and move with the bid or offer.
• Try to buy at the midpoint, rather than paying the spread. Buying at the midpoint, rather than buying the offer price, saves you .005/share, or $5 on a 1000-share order.
• Get paid by the exchange by tagging your order as Adding Liquidity Only
• Use IEX’s new Discretionary Peg order, which is designed to predict upcoming changes to the NBBO, protecting investors against structural arbitrage.  

Professional trading firms have access to a wider variety of order types that will benefit you when either adding, or removing, liquidity.  Trading with the best matching order type with speed and quality execution is the key to higher returns.  

Great Point Capital offers the resources and knowledge to utilize the most advantageous order type, netting the best return on your investment.  

Short Stocks

Have you ever tried to sell a stock short, then your broker declines the order as ‘not available to short’?

Pro firms maintain clearing relationships with firms that have comprehensive lists of easy-to-borrow stocks.  Professional firms like Great Point Capital use third-party locate firms to fill in the gaps, and track down stock for you to borrow at reasonable costs.

Great Point Capital offers the widest selection of stocks to trade by partnering with firms that specialize in locating hard-to-borrow names.  

Advantages of Pro Trading Firms Over Online Brokers

There is a lengthy list of advantages of working with a professional trading firm over an online broker.  

With a professional firm, you immediately gain with lower exchanges fees and commissions, better quality and faster execution of your order, advantageous order type and hard to borrow stocks availability, all resulting in higher returns for you.

If you keep high-balance brokerage accounts to take advantage of opportunities in the market as they arise, or are an active trader trading more than 10k shares per day, you owe it to yourself to look at pro firms like Great Point Capital.

As a FINRA firm, GPC offers you a retail brokerage account with SIPC-insured backing and all the advantages available to professional traders.

Great Point Capital has been serving the trading community since 2001.  We are one of the very few firms able to offer access to Takion Software Platform, enhancing your trading performance with fast and high-quality order execution.  GPC offers professional and experienced wealth management.  Contact us today to speak with one of our knowledgeable trading experts and earn maximum earnings on your trades.

The Need for Trade-At Rule

Impact Technology has on the Market

The liquidity of US Stock Markets have been greatly impacted by the rapid advancement of smart computer algorithms working in conjunction with ECNs (Electronics Communication Networks), ATSs (Alternative Trading systems) and Dark Pools.  The automation of smart computers along with liquidity in off exchange venues has contributed to a dramatic increase in trading on these alternative venues and have caused quite a dramatic decrease in volume traded on registered exchanges. 

It is this high speed coupled with the choice of using an ATS for fast execution and low cost that was a catalyst to what we now refer to as High Frequency Trading (HFT).  HFT firms incorporate the speed from smart computer algorithms which gives them the ability to see orders in process, and buy them up for themselves.  Since they can see all pending orders, they know if they’ll be able to turn around and sell at a slightly higher price, even in the sub-penny price range.  On high-volume orders, fractions of a penny add up to millions of dollars. 

Sub-Pennying

This combination of speed from computers and liquidity in ATSs, added to the decimalization of the markets in 2001 has spurred another predatory practice referred to sub-pennying, which goes right along with HFT, and occurs regularly today. 

Sub-pennying occurs when a broker gets in front of a displayed order by 1/100^th of a penny, or .0001.    This is all done inconspicuously with a computer algorithm program that allows them to see an order is pending, so they’ll buy up shares within a sub penny difference.

Sub-Penny trades occur because POF firms have to validate taking the trade for themselves, so they improve the price by .0001. The market is showing $10.00 x $10.01, so when an order comes to the POF firm to sell at $10.00, they fill it themselves at $10.0001, letting them claim they improved the price for the customer. The truth is that there is probably a bid in a dark pool at $10.005, that the POF firm will then sell, immediately making themselves .0049/share in the process. Even if there isn't anything in the middle that they can immediately get out of the trade, they are far from the bid, which is what all bidders in the market at $10.00 wish they could be.  All other bidders  never get the chance, however, as the POF firm steps in front of them without ever having to risk putting a bid into the open market.

This leaves traders experiencing whiplash in a scenario of “here one minute (second in this scenario) and gone the next” when attempting to execute their orders.  

Most traders that we talk to agree – a Trade-At Rule is necessary.

Headquartered in Chicago, Great Point Capital, LLC, is a member of FINRA and has been serving the trading community since 2001. Our mission is to be the leader in the equity day trading community by giving the best traders the tools and support to make the most of their trading careers.  Contact Great Point Capital, LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results.

Regulations and Trade-At Rule

RegATS, RegNMS and the effect on Markets

RegATS was established in 1999, and actually increased the popularity of ATS (Alternative Trading Systems), as they then became allowed to register as a broker dealer, rather than as an exchange that must adhere to more stringent rules. This caused the volume traded on ATS systems to increase, having the opposite effect on the markets as they quickly lost liquidity. 

The SEC responded in 2005 with RegNMS, which was aimed to unify and streamline the ATS market share by requiring that all orders coming from an ATS be routed through a national market system, creating one combined network. 

RegNMS also required that all exchanges route all orders, regardless of where they originated,  to the trading venue with the best displayed price, which did not necessarily have to be on an exchange. 

These regulations dramatically decreased the strong position that exchanges had on the market, as they lost even more liquidity.  Prior to RegNMS, for example, the NYSE traded approximately 85% of total market share, while after RegNMS that volume dropped to about 30%, and went as low as 20% in 2014. 

Trading in ATS venues and Dark Pools was even more attractive with these regulations, along with a loophole in RegATS which allows trading with hidden prices as long as the total volume of those trades is less than 5% of the volume trading of the stock nationally.  Investors were allowed to go into dark pools and trade anonymously to avoid alerting the HFT firms of what their intentions were.  As more and more investors went to dark pools, exchanges again lost market share. 

SEC Begins a Tick Size Pilot Program to address Trade-At Rule

Various proposals have been addressed to the SEC as options to implement a Trade-at Rule to address the liquidity of the markets and off exchange trading.  One proposal referred to as a Tick Size Pilot Program is in process currently and will evaluate the effect of widening the tick size.  Under this pilot program, the tick size will be increased from one cent ($.01) to five cents ($.05), only on certain piloted securities. 

Three groups and one controlled group were put into place, each with separate rules to trade by. One of the groups is actually using a trade-at rule, while another is required to quote in increments of $.05, and yet another must quote and trade in $.05 increments. 

This Tick Size Pilot Program just started last year in October of 2016, and is schedule to run for two years  For more information on this pilot program, and to receive email updates of the program, visit FINRA.org.

Other systems proposed include the “Grand Bargain” which was suggested by the Intercontinental Exchange, ICE, which suggests a trade at rule combined with reduced access fees 

Another proposed plan by Nasdaq suggests merely a decrease in fees with no trade-at rule at all. 

Our View on Trade-At

Currently the trader's public quote acts as a reference price for POF firms and dark pools to trade in front of him.  If a trader decides to display a quote in the public markets, that trader should get executions when orders come in at or through his displayed price.  The trader only gets executed once POF firms do not feel there is an advantage any longer at that price.  This means that the trader that risks the most in displaying a bid or offer is the last to be filled at that price.

That is not a fair system, and de minimis price improvements should not be used to justify the practice.

Most traders competing with this pricing model agree – a Trade-At Rule is necessary.  

Headquartered in Chicago, Great Point Capital, LLC, is a member of FINRA and has been serving the trading community since 2001. Our mission is to be the leader in the equity day trading community by giving the best traders the tools and support to make the most of their trading careers.  Contact Great Point Capital, LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results.