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

To: Gary Wisdom who wrote (118)	7/29/2000 10:58:10 PM
From: gene_the_mm	Respond to of 1426

REGARDING BIDS IN FRONT OF SIZE... Gary, I will not comment on other market particpant's trading activities. However, I will tell you that it is FAR from illegal for an MM to 'step in front of size'. The MM, by doing this, is actually tightening the spread in the market. Many day-trading books (Jeff Cooper especially) promote that day traders should look for size bids and step in front of them (under specific circumstances). That is NEVER illegal because it is a customer. Essentially, an MM is entitled to continue to trade and anticipate his order flow for legitimate market making purposes. He is allowed to pay more than any limit order he might have in his order rack, large or small. By doing this he only benefits any sellers that come in to sell their stock because he is providing a higher price. Is this unethical? That is debatable and in my opinion would depend on the circumstances. If the MM has already sold 20,000 shares on his 'automatic' system and is trying to cover a short for legitimate market making purposes and he has large buyers on a limit, he is entitled to pay MORE for the stock to try to cover his position. Will his large buyer be upset with this action? Probably, and then may never give him another order. In any case, you don't know why he is doing what he is doing. I won't get into speculation on that matter as I simply do not have enough information. Thanks for the great questions Gary, -- Gene