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Non-Tech : Meet Gene, a NASDAQ Market Maker -- Ignore unavailable to you. Want to Upgrade?

To: EL KABONG!!! who wrote (6)	7/25/2000 9:34:22 PM
From: gene_the_mm	Read Replies (6) \| Respond to of 1426

MY FIRST QUESTION... =) Kerry, thanks for asking. The difference has to do first with the types of markets that MM's and specialists work in. On the NYSE we call this an 'auction market' or 'open outcry market' whereby the specialist interacts verbally with individuals who represent orders for various firms. They are organized into 'pits', and everyone involved in that particular issue would have to bring their orders to that area of the NYSE. Also, specialists do receive some orders electronically via DOT and SUPERDOT, but unfortunately I do not know exactly how much of this works. However, I do know it is the specialist's job to risk his firm's capital in order to create an 'orderly' market for his stocks. He organizes a book that holds all of the buy orders and all of the sell orders in his issue. Specialists have the ability to halt trading in order to try to find buyers or sellers if they have an imbalance of order flow (for example on some news event) on one side or the other. In essence, they MAKE the market. Now, the NASDAQ market functions differently. First and foremost, it is an electronic exchange that with many, many market makers all risking their firm's capital to represent and execute customer orders. In turn, they must ALWAYS maintain a two-sided market, meaning that they have to post a bid and an offer on any issue they make a market in. Market Making firms can be located anywhere in the country (actually anywhere in the world, but I think the NASD will not allow foreign firms to make markets for various reasons... among them the ability to enforce U.S. laws, etc.. -- Don't quote me as I am not sure). Hence, you have all players organized into one huge WAN (Wide Area Network). MM's interact with each other, day traders, investors and other retail operations mainly via SELECTNET and other ECN's. However, retail orders are still given over the telephone by assorted firms (though the NASD is pushing to move everything to an electronic exchange of orders to properly track time-stamping, etc.). NASDAQ stands for National Association of Securities Dealers Automated Quotations. What this system does is take ALL of the market participants bids and offers and organizes it into one big book that shows the best bids (from highest to lowest by MM ID), and best offers (from lowest to highest also organized by MM ID). Then, NASDAQ offers 3 levels of service to it's customers. Level 1 is simply a quote of best bid and best offer and size on each side. Level 2 is ALL MM's and participants organized by best bids on one side and best offers on the other. Level 3 is Level 2 PLUS the ability to move markets, and thus, is only available to MM's. I hope this helps. Please feel free to ask more questions if I have missed explaining something to you. All the best, -- Gene