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Non-Tech : Market Makers; What They Do vs What We Want
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To: Paul Loucks who wrote (25)4/19/1997 8:21:00 PM
From: Steven Bowen   of 207
 
Paul, I've read that stocks like to remain listed on the NASDAQ because of the way the NASDAQ inflates trade volume. I've heard that the real actual traded volume on a NASDAQ stock is only about 30% of the stated days volume. That is, if the chart shows 100,000 shares traded only about 30,000 actually went from one investor to another. This is because say you wanted to buy 1000 shares of a company. In a lot of cases one market maker will buy it from a seller and count it as 1000 shares traded. He'll then transfer it to another market maker who may be filling your order and count that as another 1000 traded. That MM will then sell to you and count it as another 1000. All in all, 1000 shares traded hands, but the volume will show 3000 shares traded. Believe it or not, that's how they count shares on the NASDAQ. You'll notice it sometime on thinnly traded stocks as you watch the time and sales data. You'll see oddly sized lots trade back to back, like say 4,700 shares, at the same price or maybe a 1/16 difference. I think these are shares being transferred between MM's but show up on the volume.

And then the next question, and the one I can't remember the answer to, is why high volume is important to the CEO. Maybe someone else can fill in this answer. But I do remember that this is one reason some companies chose to remain listed on the NASDAQ.
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