Actually, I think that, given the opportunity, any MM will do exactly as you have suggested. Wouldn't you? If you see sell orders coming in, are you going to want to maintain a high bid price? And if you're in no hurry to dump inventory (or don't have any), why not leave the offer where it is? And, in any case, why not keep the spread as wide as possible at all times?
What keeps this in reasonable check, though, is the fact that it IS a market. Not a market of you and I, but a market of market-makers. And, unless they illegally collude, somebody will eventually jump in and better the bid or the offer, and tighten the spread.
Of course, if there are only a small number of MMs (or, horrors - one MM) in your stock, you are screwed. Frankly, I'd avoid any stock with a small number of MMs unless there was a very good case for long-term fundamentals. |
