Electronic Contract Manufacture (ECM) Sector Message Board

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Strategies & Market Trends : Electronic Contract Manufacture (ECM) Sector

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To: Gregory Cole Brock who wrote (32)	1/31/1997 12:34:00 PM
From: kolo55	of 2542

My Strategy for trading under the new NASDAQ rules I agree, this spread is ridiculous; but I do think it is better for patient investors. The dealers are setting such a high spread, because they can never be sure to react faster than the SOES bandits on fast breaking news. They used to be able to subsidize their losses by basically charging all of us the difference between the bid/ask spread. If I was trying to buy SFLX at 16 3/4 right now under the old rules, my order would never be seen except by the primary market makers. These same market makers could, at the same time, be buying from some investors at 16 1/4 and selling SFLX to other individual investors at 17 1/4 !!! My order would just sit there, and the guy selling at 16 1/4 never has the opportunity to sell to me at 16 3/4. Under the new rules, my order for stock at 16 3/4 gets shown to all brokerage firms trading the stock. So the broker representing the seller would sell to me at 16 3/4 before he sells to the market maker at 16 1/4. The seller's broker is now aware my buy order exists! The key now is to NEVER buy at the "ask" and sell at the "bid". The real market is between these prices. So send your order in at 16 3/4 and wait. It is highly unlikely, that anyone will buy the stock at a price lower than your price, because the seller knows your order to purchase at 16 3/4 exists. And no one will sell to the market maker at 16 1/4. They can get more if they sell to you. The only time a trade will take place at the MM bid or ask price is if there are no limit orders in between these prices. In a thinly traded stock like SFLX, this could happen a lot. So place your order in between the bid/ask and wait patiently, a seller will come! Paul

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