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Non-Tech : Brown & Company New "5 and 10 Store"?
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To: Spaw who wrote (149)10/6/1998 12:07:00 AM
From: Esteban  Read Replies (2) of 1865
 
OK Spaw, I understand what you are saying. I've always known who represents my shares with whatever broker I've used. You can figure this out for yourself with a level II screen and a few test orders. I thought you were implying that you get a buy order filled on the bid automatically if the Brown MM was there, and now I see you are not saying that at all.

I think you are wrong about bumping an order with a larger order. If NITE is showing 10 and you place an order for 1100 shares, he must represent your order, so NITE must now show 11 as the minimum size he will fill in order to fully represent you. The fact that the size changed to 11 and not 21 (10+11) indicates that the 1000 were his own and not some other client he is representing. He's choosing to use your shares to assume the risk of opposite movement. I don't know if it is legal for an MM to trade around his own client without representing his own shares on the bid or not. I do know that I often see dozens of trades go off at my price even when I'm the only one on the inside bid, and I don't know how I would know whose shares they are.

If the bid size had changed to 21, you would be behind another client of NITE's. On the Nasdaq, the MMs can trade around both of you if they want, because there is no time priority and no need to publish a bid to trade at the bid as a market maker. This is exactly why I prefer NYSE. When I make the bid, I get the fill, if there is one.

Esteban
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