NEW YORK (CNNfn) - Wouldn't it be great to know what other investors were doing with their money before you start gobbling up stocks of your own?|
Today, the only concrete gauges investors can use to make informed decisions include economic indicators and company profiles with no idea of how others perceive the markets.
Because the market is constantly changing, soon you may gain access to that information, according to market executives who participated in a Securities Industry Association conference on Market Structure in New York.
"The question is, will the markets develop in a way to produce the best possible liquidity and the best possible price," said Robert Colby, deputy director, division of market regulation, for the U.S. Securities and Exchange Commission.
Analysts agree that it is a difficult path to weed through but it is not an impossible task. And the added benefit would be inspiring investor confidence, which is what keeps the markets moving.
"The challenge ahead of us is transparency - getting the information from the point-of-sale to the ultimate investor," said Robert Murphy, president of RPM Specialists.
Different strokes for different folks
Investors currently have access to company-specific information but do not necessarily know what other investors, either individual or institutional, have been doing from a purely price-specific aspect. This can make investment decisions an arduous ordeal in a volatile marketplace.
"If you had your option, what the people want to do today is trade at as of the last trade that was done," said Bernard Madoff, principal at Bernard L. Madoff Investment Securities. "Most don't want to trade at the quote. Around 70 percent of my trades take place between the bid and offer."
This means if you wanted to buy 1,000 shares, the preferred method would be to look at the last price that the stock sold at and base your offer on that trade, instead of the current posted offer quote.
But RPM's Murphy said listed stock quotes still had significant value, depending upon what type of investor was trading. "For the day trader, quotes mean everything. As for institutional investors, the quote is a starting point and they're going to search for depth and liquidity."
So what is an investor to do when searching for the best price and how do you determine what is the best price for your needs? The consensus, according to the panel of analysts, comes in the form of order competition.
"Each and every order competes with each and every order out there and that's what gets the most vibrant pricing," said John Havens, managing director at Morgan Stanley Dean Witter & Co. "There are many different clients out there with very different needs."
The panelists agreed that there is no clear answer for how investors should handle their needs. But orderly price priority transactions allowing for all trading interests at a given price must be filled before moving to the next price, may assuage some of the uncertainty.
"The greatest interaction of orders is probably the most [price] important to the market," said Havens. "This is a very, very difficult question. There are a lot of different clients receiving a lot of different information."