>1000 shares is the maximum limit possible for SOES trades
>[which is Small Order Execution System], nobody cares whether
>they consider it "beneath them".
you make it seem as though posting an "artificial" bid/ask with size of 1000 makes it somehow immune from exploitation?
>if in their mind at all, should short a 1,000,000 shares of
>NASDQ stock for no other reason but they think MMs post
>bid/ask too high?
ok. let's go thru this slowly. any market is a price discovery mechanism; a mechanism for finding what something is worth. right?
so let's say manipulator M wishes to post an inflated bid price x for stock y. this means that manipulator M is hanging a sign on his door that he will buy this stock for x dollars. and if M is truly a manipulator, then the true value of this stock -- the price at which the rest of the world would buy or sell this stock -- is x-e, where e is the excess added to the price by the manipulator.
so M is paying x for something that's worth x-e to the rest of the world. enter the SOES bandit (or any sort of trader), who can now buy at x-e from the rest of the world, and sell at x to M. M is forced to either go back to prevailing market prices, or be squeezed out of the market thru a forced loss of e on every transaction. the nasdaq requires trades to take place at the highest available bid, and the lowest available ask. so if this stock is worth x-e to the rest of the world, then the rest of the world is posting bids and asks of x-e. but manipulator M posts a bid of x. this is a no-risk opportunity to buy from "rest of the world" at x-e and sell to M at x.
price discovery. price discovery. the prevailing market price is a nash equilibrium, if you know a bit about game theory.
>official and publicly acknowledged goal of NYSE specialists
>and NASD market makers "to support" prices, "to provide
>orderly markets", etc. They do their short term trading in
>such a way as to drive prices up
go to the nyse homepage and look up the job description of a specialist. i can guarantee you that it has nothing to do with keeping prices up, or keeping prices down. a specialist ensures 1. minimum amount of movement in prices and 2. maximum continuity in prices, ie, a stock shouldn't go from 50 to 51 without going thru 50.5 first. this is true of moves up as well as moves down. a specialist tries to prevent strong moves in any direction. this is what it means to provide an orderly market. it has nothing to do with artificially keeping prices high. again: prevailing prices are a nash equilibrium for all involved. furthermore, market makers' own inventory in a stock is always hedged to be delta-neutral, so they really don't care whether the stock price of their inventory goes up or down.
>Try to read and understand what people say, before you
>agrue.
you are the one with a heavier burden of proof. people claiming that the markets are rigged are a dime a dozen. until i see some proof (please show me, for example, where the nyse or naz say that a mm/specialist has to keep prices up in a down market any more than he/she has to keep prices down in an up market), i will place you in the same bin as the other conspiracy theorists in our world.
best of luck looking for that proof. |
