In Release No. 34-40900, the Securities Exchange Commission published the findings of an investigation of market maker practices that began in 1994, and instituted proceedings pursuant to Sections 15(b) and 21C against 30 market-manipulating firms and individuals, and the repercussions are still resonating.
Nothing happened. There were no repercussions because there were no proceedings. The firms gave the SEC some money to get them off their backs. Once the SEDC got the money they were happy because getting the money showed that they had done their job.
The manipulative modus operandi: One market maker would ask another to move its quoted prices in order to create a different appearance to the market from which the requesting market maker could benefit.
How does the requesting MM allegedly benefit? Why should another MM cooperate? How can another MM trust either the requesting MM or that the market will react according to design? How does the SEC discern between public entries of bids and asks and those of the MM which by default are competitive. This claim assumes that MMs trust one another, at least enough to collude, but that isn't possible since it would require all of them to collude. That isn't physically possible because it isn't physically possible to instantaneously communicate all the signals needed to coordinate.
For example, a market maker needing to buy stock because of a short inventory position, would ask another market maker to move his quote downwards to join the inside ask.
How does that improve the need? Why should the other MM cooperate?
The purpose of the requested quote movement was to signal a downward price trend.
What incompetent fool is writing this drivel?
That way, potential sellers would be misled into reducing their price expectations.
Consider, someone lowers a bid and that means that I should sell, because it "signals a downward price movement". Well, if it works that way then I should be able to observe that occurring and use it to my advantage. QED.
After the quote movement, the requesting market maker would buy the stock at a lower price, at the expense of the seller.
This assumes that there isn't a third MM or other public involved entering bids or swapping. But then it hides the fact that the only seller left is the other MM!
What should be the fair bid or ask when a stock is illiquid and seldom trades? Whatever it takes to get the MM making a market out of bed to make another stupid trade with the greedy public.
Market maker manipulation – MMM – saw MMs failing on three scores: (1) to provide the “best execution” of customer orders, intentionally delaying trade reports, (2) to honor their quoted prices, (3) to create or maintain required books and records.
Oh, now they tone down their original allegations. How does any of the above effect you, the speculator in penny stocks?
No one can show that the "best execution" wasn't provided. Any MM not honoring a bid makes a mistake, because such action is based on the assumption of knowing where the market is going. No MM knows that.
Market maker misconduct was typically, but not always, limited in duration and scope to intraday violations relating to particular stocks, but cumulatively had a detrimental impact on the fairness and efficient functioning of the Nasdaq market.
There is no cumulative effect. This claim like most in this hack document is written by illiterates.
Just imagine what the MMs did when no disclosure was required, as with OTCBB stocks.
No disclosure means the market is truly free and therefore, truly fair.
The investigation also leads one to surmise that the cancer of MMM is far more widespread than originally believed, and that these arrogant “pros” aren’t smart enough to make money in the market legally.
If you base the reasons for your losses on this kind of swill, you need to get out of markets. They require more maturity. |
