PETER:
The whole idea of MMs manipulating any stock is paranoid at best ridiculous at worst. First of all, each MM has their own account to worry over, they are not going to sacrifice net capital for another MM. Second, this is a Zero Sum game. By that I mean in order for you to make money in a stock, someone has to lose money in that stock. Someone sold you the stock in the first place, right? So, if there are MMs manipulating a stock that would mean that some are taking losses for the charity of other MMs, a concept hard to imagine.
A better explanation would be that some MMs trade more aggressively than others. In ATECs case, when there was strong buying the stock went up. Any selling was canceled out by the strong buying. When there is weak buying selling can then have a very adverse impact on share price because MMs have to be flat by the end of the month in their inventory or else the have to file the focus report and commit net capital. If they think that someone will sell at say 4.5, they will drop to 4.25 and see if that same seller is willing to do the trade at the lower price. Why take in the stock at higher levels if you do not have to?
Believe me, I have been on the wrong end of those MMs on more than one occasion. The flip side is that any good buying should move the stock upward by utilizing the aforementioned strategy.
NASDAQ gets alot of heat on this issue, but no one says anything about the NYSE. If you think the negotiated marked is tough, try going against a specialist. At least on NASDAQ there can be 20 MMs that all have their own interests(presumably one which mirrors yours) whereas on the NYSE there is only 1 person dictating the ebb and flow of stock. Also, try to compete on order flow with big institutional buyers and see what type of execution you get.
On NASDAQ, firms like MH.Meyerson, Herzog, Mayer&schweitzer, Troster and Hill Thompson get all kinds of heat regarding their trading practices. I wonder how many people out there know that Charles Schwabb owns Mayer&Schwietzer? There are other discounters who own pieces if not the whole, of these very firms that are accused of manipulating stocks.
I am sure you were not expecting this lenghty view, but I hope it sheds light on your question.
Mike Irving |
