SpecialistMan (Grasso must have been worth the money)

Wall Street Journal ^ | Friday, September 19, 2003 | JOHN C. BOGLE

[presidio9]

Well-deserved attention has been focused on the $140 million compensation package received by Richard Grasso, the recently departed chairman of the New York Stock Exchange. Undoubtedly there will now be significant changes at the NYSE Board. But the real question is why that Board, with representatives from the most sophisticated firms on Wall Street, agreed to pay its chairman such a rich compensation package. There is only one conclusion: He was worth the money.

[presidio9]

FWIW, Bogle is director of Instinet, and he therefore has a tremendous interest in easing the Big Board's grip on equity trading. His claim of unfair trading advantages for specialists is exaggerated.

[tdadams]

I would disagree with your opinion. He obviously does have a vested interest in changing the status quo, but all of his claims about the advantages used by specialists are completely accurate.

[krb]

I don't know what all the fuss is over his compensation. I mean, what else would the exchange do with the dough if they didn't give it to Grasso? Seriously, like they are going to give it to you, or, say make it a teensie bit cheaper to trade issues if they paid him something more down-to-earth...

[tdadams]

While a lot of fuss is being made about Grasso's compensation, this article in particular really has little to do with that. It only serves as a pretext to lament the specialist system the NYSE uses, which ultimately paid Grasso's salary.

[krb]

Yeah, I know. I was just whining about all the whining. :-)

[presidio9]

Incoorrect. The advantge only exists in a linear market. When there's volatility, the specialists get killed. Of course the specialists have an advantage, that's why they pay for the seat in the first place. But once there, they need to posess the same market savvy as traders elsewhere in order to benefit from it.

[tdadams]

I hate to correct you again, but the specialist loves a volatile market much more than a stable market. In a volatile market, he can make a killing on the spread. In a stable market, he has to settle for pennies per share. Sure, there are times when the market takes a dive and the specialist has to take a hit, but you're utterly naive if you think they're not able to offset that later.

[presidio9]

Tell that to the specialist who are the first to get crushed every time there is a run on the Market.

[tdadams]

OK, if it's such a bad gig, then why are there so many willing to pay $2 million a year for the priviledge? As I said, you're naive if you think they don't offset their losses. Either that or you have a vested interest yourself in protecting the specialist system. It's an anochronism anyway.

With the electronic availability of real-time market data, the market is more democratized than ever. So, at any price point, there will always be buyers and always be sellers. The specialists don't serve the sacred function they used to. I say good riddance.

[presidio9]

You think $2mm is a lot of money? Let me explain something to you about free markets: If these guys were printing money the way the author indicates the seats would go for a bit more than that, don't you think?

[tdadams]

I know what a seat on the NYSE goes for and I know how much a seat generates. It's priced accordingly. You think you know more than you really do.

You've lost the argument. If you'll just admit it, we'll spare this thread another couple dozen senseless posts.

[presidio9]

You've lost the argument. If you'll just admit it, we'll spare this thread another couple dozen senseless posts.

I was not aware that we were having an argument. Thanks for letting me know. If you go back to post one (which you replied to) my point was that Bogle exagerates the profitability of the specialist position. With good reason. I never said "I love specialists" or "God save the Big Board." The only senseless posts are your own.

[tdadams]

Senseless as in "unnecessary", but thanks for showing us you'll quickly resort to an ad hominem, a sure sign of someone who can no longer logically argue his point.

You post about how the specialists face crushing losses and don't make as much as one might think. I can only laugh. The specialists are neither benevolent nor altruistic. Even an underperforming specialist will make more on an average day than most people in middle America make in a year.

[presidio9]

a sure sign of someone who can no longer logically argue his point

When you even get my point I'll be sure to let you know. You are just looking for a fight and I'm not biting. Go find somebody else to play with.

[tdadams]

On the contrary, you're clearly outmatched in this debate. You're taking your ball and going home. Come back when you've done your homework.

[presidio9]

Somebody needs to get a life. There IS no debate. My point that Bogle exaggerates the problem is valid and any other dialogue is simply your own masturbation.

[tdadams]

Using a vulgar, classless, junior high put down and you tell me I need to get a life.

We've come full circle. Your first post stated that Bogle exaggerated the problem. You gave no substantiation to that accusation. That's because it's not an exaggeration. It was exactly on target.

You simply have no idea what you're talking about and every post of yours on this thread only proves it.

[tdadams]

You don't have any credibility speaking about the stock market and you don't have any credibility trying to mitigate your sophomoric comment. You're just an unintelligent person posting an uninformed opinion who can't stand getting a public spanking. Grow up.

[presidio9]

There is no public spanking and we are not talking about the stock market. There is only you looking to fight me and me ignoring you. Hence, you are playing with yourself. Enjoy.