Richard, I'm a month late in responding to your post, but as you know, market makers love to take advantage of your market orders so they can gather (or unload) some of their inventory.
If you have reason to believe that a market maker did so, and you have tic-by-tic record (enter a "trade dispute" with your broker and they can dig up a trade-by-trade record), you can file a complaint with the SEC. The more people do this, the better chance we have of keeping market makers honest.
Visit the following site to file complaints:
sec.gov
A typical example of a market maker taking advantage of your market order would be: You enter a market order to sell 1000 shares when the bid is at $20.25 and ask is $20.50. The market maker(s) are currently showing a size of 2000 shares at the bid. As soon as your order comes in, they drop the bid (without any sale of 2000 shares that would logically clear out the "size" at that price level) to $20.125 and your order is filled at 1/8 lower than you expected.
In the next few seconds, they raise the bid to $20.25 and show a size of 2000 shares again.
If the foregoing behavior shows on the tape, you may have a clear case that those jacksters have pocketed an extra 1/8 on your transaction.
Market makers whine that they are "making a market" and in so doing, they are incurring a certain degree of risk, which is true, but they also have much more information than anybody else (e.g. they can see the entire spectrum of limit orders above and below the current trading price, so they can see in which direction the stock is most easily moved).
Given the current state of technology, there is no excuse for the existence of market makers. A computer can easily be programmed with a resource allocation algorithm such that buyers can meet sellers without a bid-ask spread. This is the computer age! The fact that market makers still exist is truly unfathomable. |
