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Non-Tech : MB TRADING
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To: Christopher who wrote (1559)10/25/1998 7:56:00 PM
From: TraderAlan  Read Replies (1) of 7382
 
Christopher,

The MMs pay a fee to the broker for the volume of the brokers transactions. The broker also benefits by avoiding floor brokerage fees. The MM benefits by keeping the spread on transactions. One of the provisions that is supposed to keep this arrangement "honest" and not contrary to the client's interest: the MM is obligated to honor the inside price at the time of the order.

Obviously, the big criticism is the opportunity by both broker and MM to abuse the retail client's transaction. This has been manifested recently by MMs sitting on larger market orders for many minutes until the market swings to it's short term extreme and then filling orders at the worst possible prices.

Alan
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