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Strategies & Market Trends : DAYTRADING Fundamentals

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To: E. Davies who wrote (4625)	10/4/1999 12:21:00 PM
From: GraceZ	Read Replies (1) of 18137

The single biggest difference between a MM and the rest of us is that the MM is not required to actually fill whatever promise he makes. Eric- I have a close friend that is a Nasdaq Market Maker and I have put this question to her, whether or not a MM can manipulate the price up or down by throwing out a fake order. She says the opposite of your statement, that she is required by Nasdaq to honor all orders placed. Even when the bid/ask is crossed or locked. I asked if she puts out orders in order to fake the direction, she says..."its a poker game" (I'm assuming that you don't have to show your whole hand.) She said if she throws out an order to sell (to move the price lower) with the intention of buying then she can get hit by the traders....now she has to cover her short and still go after the stock for the client. This works great if every body jumped on the sell side, but backfires if no one takes the bait. I think that traders have a real hard time understanding just how much money MMs have at risk making a market in these low float, low volume stocks. Last Dec 1 when the bottom fell out of the Nets a guy on her desk lost over a million in one day!

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