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Technology Stocks : Analytical Surveys (ANLT) computer maps
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To: Jody Ritchie who wrote (1031)7/21/1999 6:42:00 PM
From: TLWatson59  Read Replies (2) of 1157
 
Understanding OTC/NASDAQ trading. The NASDAQ where ANLT shares are traded is a participatory market not an auction market such as the NYSE and other "listed" exchanges with specialists controlling the orderly flow of buy/sell orders.

MM's,you know those notorious people lambasted on so many posts, offer competitive bid and asked prices on a given stock. Sometimes these quotes are for themselves in order to profit from any sale of inventoried stock or a purchase to cover a short sale made on a stock. The price differential being their profit or loss as the facts may warrant. MM's also serve as brokers to other brokers who execute orders on a commission basis. Many times a MM will gamble and try to fill a commission order from his inventory, an open market buy or short sale and add to his profit potential should he guess right.

The Bid and Asked prices you see listed on LevelI or get from your quote service are inside prices. You are guaranteed an execution on the bid or at the asked, provided the the number of shares in your order does not exceed the quantity displayed on the Level II screen. They also represent the price that the MM is prepared to honor. Your offer or bid price have no weight or priority unless the MM is willing to honor it even if it is the same as shown on the screen. That is how they make their living ; buying at the bid price and selling at the asked price. If the spreads between the two are great enough and the stock trading active enough sometimes you will luck out and execute an order in between the spread.

On a listed exchange such as the NYSE you're dealing in a pure auction market. This is governed by a specialist who is prepared to buy and sell shares in order to maintain an orderly market. He operates out in the open at a post on an exchange floor. Brokers wishing to trade that stock gather around his post and they are free to offer or buy shares in competition with the specialist. That is where you see more orders executed in between the bid and asked spread, since your broker is allowed to express his order openly for all to hear and compete for. There is no guarantee that all of the shares you want to sell will be taken or offered if it is a buy order.

In both markets there is a "size" posted or known. That means you can find out how many shares will be filled at a bid or asked priced and adjust your order accordingly.

Now that I have confused your further, what is that you don't understand about how you cannot place an order in between a Bid and Ask price OTC and hope to get an execution unless some other broker/MM comes in to fill the void.

Don't forget that if there are others with the same thought as you get to the floor before your order does you do have wait your turn. That holds true on both exchanges and disputes are settled by the "time of sale" rule.
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