The NYSE vs. NASDAQ

Quite the interesting remote boxing match this morning on CNBC between the heads of the NYSE and NASDAQ.

Distilled to its essence, the mudslinging between the two chiefs consisted of Duncan Niederauer claiming that the "other exchange," i.e., NASDAQ, had insufficient liquidity to support market orders, while NASDAQ's Bob Greifield accused the NYSE's specialists of, once again, stepping away from filling orders for 90 seconds in an already-plunging market.

Who's right?

It matters, because the NYSE is voiding many trades which rewarded buyers at the very-low prices available once the NYSE's specialists abdicated their role.

Worse, as various pundits noted, many of the institutional buyers brave enough to step in at the bottom and buy, sold out before 4PM for nice gains. Now, they entered this morning short and had to cover.

Whether retail or institutional, investors don't need this sort of game being played. I'm not talking about the plunge in prices, but the arbitrary post-hoc decision to void selective trades. The most profitable, of course.

Funny how that worked, isn't it?

My feeling is that Niederauer's NYSE is the culprit here, not Greifield's NASDAQ. People want to trade, and often allow existing routing systems to "find" the best price. If the NYSE is effectively taking a break, those orders will go to the NASDAQ. If that means lower volume, and automated programs are stepping away lower with bids to buy as sell volume builds, so be it.

Whether it's 1987 or now, using a "market order" during a panic is an invitation to disaster. You have knowingly surrendered to uncontrollable market pricing forces.

If anything, this shows, again, for the zillionth time, that NYSE specialists will violate their duty and step away rather than do their job and provide market liquidity when it goes against them.