This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Opinion: We Need the Plus-Tick Rule, Part II

Stocks in this article: SKF UYG

Unfortunately, this basic problem may be used as an excuse to stop trying, in the interest of enabling other outcomes. Because there is no simple way to resolve the issue, the best-effort solution is adopted, and after a while it becomes the standard. The original defect remains lurking in the background, if somewhat forgotten if not ignored completely. The fact remains, however, that big orders have so much of an effect on the VWAP calculation that the original argument for making the calculation at all becomes less relevant for that big order.

But how does this affect the market? There are two main types of traders executing baskets: those who are trying to make money by being right in about some outcome they have predicted, and those who are facilitating -- that is, they have promised, for a management fee, to provide a match between a vehicle, such as an ETF, and some underlying basket of securities. Both must be "in it to win it," or get in and out of their carefully crafted baskets simultaneously, without failures to buy or sell portions of the basket diminishing the application of their strategy.

However, the trader who is trying to make money on the trade has a natural limit on the overall price he or she will be willing to pay for the basket, while the facilitator may not be so constrained. As long as the facilitation trade is small enough so that it doesn't much affect the larger index, there might be little difference in market effect between the two. The scenario changes rapidly when the "tail" of large capital allocations coming into the index by way of the vehicle operated by the facilitator begins to wag the "dog" of the underlying index.

4 of 7

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs