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To: FR1 who wrote (11750)	6/24/1999 6:28:00 PM
From: E. Davies	Read Replies (1) \| Respond to of 29970

I'm just curious about the % of equities that are bought by MMs (Merrill Lynch, pension plans, etc) vs the average on line investor. Stock price is not based on % owned by MM's or any other institution. The price is based on how whether someone is willing to pay that price at that moment in time. % dollar volume of institutional traders vs. "amateur" traders obviously varies moment to moment and stock to stock. I'd love to hear Ahhaha's opinion of a rough range though. The Market Makers are short term traders, they follow the market and dont think of long term fundamentals. Eric

To: FR1 who wrote (11750)	6/24/1999 10:52:00 PM
From: ahhaha	Read Replies (1) \| Respond to of 29970

The question is ambiguous since MMs don't buy stock to hold. Let me qualify that. MMs have two accounts, a trading account and a "personal" account. The former is a market mechanism and so they go from net long to net short maybe daily, but the shares are all artificial, bookkeeping entries. The average net position is zero. The latter represents proprietary capital where the MM buys or sells for their own risk and benefit. There are rules about how this account is fed. An MM can't interfere with public orders in order to feed it, but they can buy for their own accounts when they are not in competition with the public like when the public is panic dumping. These principal trades represent less than 1% of the turnover. In most stocks 70 to 90% of the action is institutional. You can't tell necessarily what a trade's source is by looking at its size. Usually though the big ones are institutions. Institutions mostly buy by booking orders away from the market, but sell market. The public buys and sells mostly market. The public action creates random noise that enables the market mechanism to discover price regimes accommodative to proper evaluation. The institutions determine this proper by booking and if the book isn't thick enough to absorb public selling ceteris paribus, the stock will move to levels beyond instantaneous fundamental expectations. Other institutions or perhaps MMs see this, check with the company, and if everything seems ok, buy market in size. The percentage attributable to public action is about the complement of the institutional action, 10 to 30 %. If the public panics and dumps, the institutions will pull bids. The MMs will make a market at 1/4 point right down the row. If the influx of sell orders is too great, they'll close the market and gap it down on re-open. In establishing a re-opening price they may call institutions or others and ask them how much and at what price if they aren't willing to pick up the excess through their trading or proprietary accounts. Once they have an idea at what price demand lies and taking into consideration the possibility of further selling, they'll open on a big block and see to what extent short covering demand lets them distribute public market orders to sell. Once they re-open they can't interfere with the market unless new extremes occur. It doesn't matter who is doing or to what extent. What matters is what is the fundamental worth. You can have massive selling push a stock on a given day, and then see it pop right back up on nothing volume the next day. It is humorous to listen to the public talk about demand and supply as though these factors determine price. They don't. It's marginal demand and marginal supply. The random noise of the public action discovers what people really think a stock is worth at the margin. It could be and often is that public selling and buying is balanced. If the public starts selling such that the balance is 55-45, the stock will tank. Whether it recovers from this random fluctuation depends upon what others, usually institutions, believe.