If you mean a computerized MM, backed by cash, I withdraw the question (although such a program which set a bid of $10 in this particular case would run out of cash pretty quickly :)
Good morning, Brec-
It's clear to me that a computer MM is a concept I don't fully understand. Perhaps I don't fully understand the process as is stands now.
But in my case, it seems to me that there is little stock for sale at ANY price. The people that own the stock have bought it for the long haul, and do not watch the day-to-day undulations of the market. But if the human MM were to play this situation straight, what could they do? They have no stock to sell, hence the buyers must be turned away, correct?
MM's don't make money if transactions don't occur...so they fill buy orders, betting that some owners of the stock will see the light (profit) and sell. But the stock is heavily fragmented into such small lots that even $5/sh doesn't move many people to sell.
Suddenly, the MM's look and see that they have handed out a million+ shares of fictional stock now valued at $2.50 to $3....they are liable for that debt, and even if they won't need to cover immediately, they don't want this Sword of Damocles hanging over their heads. They start "shaking the box," trying to frighten people into selling, and walking the bid/ask down on the slightest pretense to further entice/force selling.
I object to two things here: The short situation, and the MM's tactics that are used to try to relieve it.
As I understand it, a computerized MM would not allow this situation to occur in the 1st place....at some point, a buy order would have come in, and the computer would have told the buyer, "Sorry, no shares available." On the one hand, my stock might have stalled at the 75¢ level....too, buyers would have likely gone elsewhere with their money rather than fuss with my stock.
I can see how MM's may actually have helped us...at the same time, their mind-games are painful to endure.
I welcome any change with open arms, methinks.
Rick |
