Que, let me double-check to be sure I've got this down. Let's take a hypothetical:
B=5 7/8 for 1,000 shares, A=6 for 1,000; let's also assume a stop market order below at 5 3/4. Finally, let's assume no other orders are outstanding.
Now assume the market maker wants the shares at 5 3/4. Can he only do this if no other market makers have a bid in at 5 7/8? I'm guessing he can't lower the bid to clear the stop until all higher bids have been filled. For example, say there are two market makers, A and B, both with bids at 5 7/8. Then a third market maker or broker C comes along with an ask of 5 7/8. Let's say A buys those shares (is this done by queueing, Q? first come, first served?). Then the only bid is market maker B at 5 7/8. Now, since no shares are being offered for 5 7/8, does that leave the coast clear for B to lower his bid to 5 3/4, thus clearing the stop?
I hope that's clear. Is that the game?
J |
