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

To: Dan Duchardt who wrote (802)	8/27/2000 3:05:35 AM
From: Apakhabar	Read Replies (1) \| Respond to of 1426

Dan, I think where we disagree (and where Gene could enlighten us both) is on how much risk a MM is going to assume in order to fill those big institutional orders. I think your view is that if an institution says it wants 100k but it won't pay more than 15, the MM is going to let the institution buy everything up until the price reaches 15, and then the MM is going to fill the rest from inventory. I understand that the MM wants the institution's business, but I can't believe they want it if it means they have to assume undue risk. <<<<The one thing I'm pretty sure of is that after a period of selling large blocks to institutions at a rate far in excess of the small buying they could do from a few individuals satisfied to take profits, inventories were depleted. And it wasn't being done by a single "stupid MM" sticking his neck out far enough to get it cut off. It was being done by several of them, knowing full well from their assessment of the supply and demand that they were not alone.>>>> I don't understand why all these MMs, knowing "full well" that demand far exceeded supply, would keep selling at 15 just to fill the orders, knowing the only way to get the stock back cheaper would be to buy it from panicky retail investors. Would you assume that you could panic the public to sell enough shares not only to you but also to some other MMs? Certainly MMs want the institutional business. But I think the MMs are very good at getting the institutions to pay higher prices. Just look at the 85% of the funds and institutions that lag behind the S&P 500 every year. My unscientific sense is that MMs are like bookies setting spreads. Bookies are concerned not with the actual strength of the teams but only with the public's perception, so they set the spread as close as they can to the number that will attract equal numbers on each side. They are extremely adept at this, as can be witnessed by the overwhelming number of spreads that don't change in the days prior to a game. Bookies just don't put themselves in a position where they have a big stake in the outcome of a game; the amount that they end up having on one team due to betting imbalance rarely exceeds their vigorish. I'd be surprised if the MMs operate much differently in regards to risk-taking.

To: Dan Duchardt who wrote (802)	8/27/2000 9:36:56 PM
From: gene_the_mm	Respond to of 1426

DAN... As you can tell, I am catching up with the thread tonight POST by POST. Hence, I just read this post which basically replies to my reply to you as well (confusing right?). I understand your point of view better now and took most of what you said as a masked 'cheap shot'. I look forward to furthering our exchange of ideas and opinions in this area and again apologize if I insulted you in my last post to you. Please address that post and I will try to respond to your questions to me. All the best, -- Gene