Morgan, I stand somewhat corrected.
(Well I received quite few times 100s fills all 17 secs until I decided to cancel the remainder. It reminded me somewhat on a fuzzy logic system. Consider a stock is to be bought up, and you are an early buyer, you receive the shares. If the ask is worn off by other trades and, still shows even 500 or 1k, then one won't even get that size, but maybe few 100s.)
Second, it kind of nails the MM. Let us imagine he's got 20K to unload. He now can't afford to sit there with a size 1 showing, kicking off traders with 100 share fills, while the price just sits there. That's why they do it - price control.
Clearly. That's the intention of the amendment, namely not to lure in the buyers by leaning against the ask with an indefinite number of shares. Now he has either to collude with other MMs, ie do what is forbidden namely to shift shares and let other MMs step in at the same price (and that may be harder to achieve), or raise the ask.
The price fluctuations will be more frequent, though not as jumpy as before.
The dangers pevail: When one MM has to unload but not others, he may phase in selling by showing a minor amount at the ask, but then consequently hit other bids later once the price is high enough and some volume comes up, to average his original selling objective.
The market should adopt more an auction type behaviour with small price increases if one MM really wants to sell shares but so he does in small units, as opposed to fake asks or resistance to round up shares on the other side.
As you have mentioned, it would be already a great improvement, if existing rules were obeyed.
And still they could go away with the flimsy excuse that it was perhaps a "customer order" which is to be executed on a "best efforts basis", ie in small packaged amounts.
(All that is driven by my maybe skewed view: If you have something to sell do it quietly so don't have it discovered too early by the other participants. If you have nothing to sell but more to buy then wear out the early buyers and scare off the one who arrive later, and when possible shake the tree a bit later)....
SPSS, a rock solid company is a good example of games in a thin market - both ways, between Mar 09 and July.
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