A question for you more experienced marketeers. What are your opinions of this:
A former market maker recent described how MM's will play stocks that behave as AVCO did on Thursday. He said that often, an MM will take a huge short position on such run-ups, anticipating a decline. Then the MM will cover when the stock drops.
If this is true, then it seems that NASD did the investor a huge dis-service when they halted the stock. They, in effect, changed the rules purely for the benefit of the MM.
Had NASD allowed AVCO to trade "naturally" on Friday, perhaps it would have run up a bit more, perhaps not. But at least, those who took positions would have had some hope of un-winding their positions without losing too much.
Now, it seems NASD has doomed the current holders to severe losses. (And guaranteed the MM's some tidy profits.) That seems irresponsible of NASD.
I'm not one to blame the "evil MM's" for my own trading losses. After all, the MM's risk their own capital everyday to "maintain the orderly flow of buys and sells." But in this case, I think NASD screwed up by either waiting too long, or by acting at all.
NASD implemented an ad-hoc (and I believe, arbitrary) "limit-up" on this stock.
Just my un-emotional 2 cents. |
