After reading all the posts on the MM's , I wanted to address a few points IMO.
I have no special sympathy for the MM's, but I think people tend to blame somebody for the frustration they face especially if its against what appears to be their "expectation". Intel was expected to have a runup, due to the news it had on the day of earnings announcement. Well, things did not go as expected and so MM's became an easy target to explaiin the phenomena, which appeared to be inexplicable at that moment.
Firstly, I beleive the markets are efficient. If they are not, they will not be able to survive. If at all certain predictable patterns develop, they are only temporary, because money will flow in (or out) to cancel the effects of the phenomena very quickly.
Secondly MM's are not a homogenous group of people who sit on the same side of the fence with same interests all the time, and therefore conspire to sell or buy the stock at the same time to fix a price. They have different interests at different times. One could be accumulating shares for an institution, while another could be unloading a big sell order for their clients at any given moment.
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Thirdly, the MM' s do not take a directional risk, because it goes against the viability of their business interests. They make mega% annualized returns on risk free price arbitrage, and delta neutral spreads, in addition to the volatility and time premiums decay which they pocket because usually they take the suppliers role. Note that the demand is created by the public not by the MM's. Statistically they are predominantly on the sell side.
After said that, I will also say they do have the ability for price manipulation, ONLY on a very short term basis. Like if they want to hold the price firm in the next fifteen to twenty minutes, they can do that by manipulating their order flow. In intraday trading they can kill you, but beyond the 15 minutes they are at the mercy of either the "irrational" or the "rational" exuberances.
All of the above ofcourse IMHO.
Looking Forward----- |
