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To: mishedlo who wrote (142131)1/8/2002 12:32:21 AM
From: GraceZ  Read Replies (2) of 436258
 
2) Does it matter if it is the MM or someone else doing it?


It does if you are saying that there is widespread abuse by the Nasdaq market makers. If I put up a big bid and then remove it just before it gets hit, its not illegal. I see it happen all the time on ECNs where there is no MM, just one trader to another. You can call it anything you want (sneaky, deceitful, etc.) but I can't lose my ability to trade over it or get fined or go to jail....the order could get hit though before I can cancel it. It certainly has the same effect on you as if the MM does it, other traders are fooled into thinking there is large size that isn't there. My point to you is that you don't have any way to know if the MM is acting on their own when these bids appear and disappear or if they are acting as agent.

1) Your friend might not but does that mean no one does


I assumed as you did, that's why I asked her. She sat at a pretty big desk with a lot of other traders, where there are few secrets. I'm certain there is someone somewhere who has done this and maybe even continues to do this, I don't know. What I do know is that if you could make close to a million a year following the rules it would be silly to risk doing something illegal that also has the downside of subjecting you to big losses. Every move is traced. If an MM is accused of doing something illegal it is highly traceable.

Frequently the firm will settle with the SEC instead of fight a disciplinary action because it works the same way your liability insurance works, if the cost to fight is more than the settlement you settle even if you are innocent.

The thing about the market is that everyone does in fact distrust everyone else, almost everyone assumes someone else is in fact the one screwing them. If you are trading, basically you are taking money from someone else who is also trading. Traders will try just about anything to disguise their actions. Institutions do this to a certain extent as well. They break up their buys over several firms so that the word doesn't go out that one particular firm is accumulating a large block of whatever.
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