Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: shades who wrote (59337)	4/24/2006 2:05:02 PM
From: GraceZ	Read Replies (3) \| Respond to of 110194

You and I don't get to see what the market makers/specialists see eh - do you know how one becomes a specialist/market maker? Philster says it is a family type business - like the mafia. Maybe YOU don't, but I have. I've been on quite a few trading floors in my former life. Three of my oldest, biggest clients, one is an investment bank, another a very large brokerage and the other one of the best known mutual fund companies. I also have two close friends who were Nasdaq MMs for many years. If I want to get either of them laughing hysterically, I just have to mention some of the stuff that I hear on SI and elsewhere about how market makers and specialists manipulate prices to shakes shares loose or some other silly notion. The MMs and specialists win on balance because they own the opposite of the public action which has a negative expected return. They have a positive expected return. The main reason being that they are forced to get on the other side of public action at intermediate extremes of price movement over and over again. Now imagine how great your return would be if every time some idiot freaked out at bad news and decided to sell at some ridiculously low price you were forced to buy from him? Or imagine that every time some other idiot decided to pay some ridiculously high price for something you were forced to sell him shares you didn't own? This is the market maker's job, to simply cross orders until there is a hole or lack of continuity in those orders that needs to be filled, they are the buyer and seller of last resort. It's the last resort part that makes them money. It's Goldman bailing out the Bass family buying fifty million shares of DIS at 13, a price it never offficially saw and will probably never see again.