After Hours Trading(ECN)-The Coming 24/7 Trading Explosion Message Board

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Strategies & Market Trends : After Hours Trading(ECN)-The Coming 24/7 Trading Explosion

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To: Richard L. Williams who wrote (57)	4/10/1999 2:46:00 PM
From: Tai Jin	Read Replies (1) of 314

I'll try to answer that. What the MMs do to cover their short positions is a direct result of having gone short to maintain liquidity. Sure if they did not go short at a reasonable price then the only option would be for a buyer to pay a very high price. So the buyer was done a favor by the MMs. Now, the MMs obviously don't want to take a loss either. So at some point they will want to cover their short positions at a lower price. This is where they might try to lower the bid to shake out some shares. They can do this if there is very little or no demand for the stock. Perhaps you are arguing that if there is more than one MM on the bid and the one who is short lowers his bid and the others follow then maybe they are playing games. But the MMs are trying to make a market and maintain liquidity. So if there was no real demand behind those bids then the MMs are free to lower them. They can do this the same day they went short, or gap the price down the next day (all assuming that there is still no demand - if demand suddenly came in the next day then they will gap the price up). ...tai

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