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Non-Tech : Bid /Ask Spreads - Market Manipulation
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To: Sidney Reilly who wrote (265)2/7/1997 12:34:00 AM
From: Robert Graham   of 308
 
Yes.. Accumulating is an interesting thought. Also the MM may have been shorting the stock in the process meeting purchase orders for the stock. Now he wants to cover himself. Still, not covering a short position by the end of the day sounds risky even for the MM. This is of course my opinion. I am no "expert" on this subject.

I find it very worthwhile to examine the intraday activity of a stock that is being thinly traded. This is where alot of the MM's strategy is revealed.

I have a question. I wonder what would happen if an institution, or for that matter, a brokerage house that is also MM in a stock, wanted to purchase a large block of stock quickly. Normally this would artificially disrupt the price action of the stock. Both the institution and I would think the MM would not want this type of interruption in the trading of the stock, particularily if the stock is thinly traded.

So I wonder if this institution can make an arrangement with the MM(s) which will have them accumulate the stock through a period of time in such a way where it will not interrupt the normal flow of trades in the stock. For this arrangement, the institution negotiates a price for the stock that is aggreeable to the MMs. I know that the MM is in the position to do this for themselves, but I wonder if they can do it for their customers? If this is done carefully, this should not compramise the integrity of the trading system.

What do you think?

PS: I think the new NASDAQ regulations are designed to encourage more accurate bid/ask unit quoting from the MMs.
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