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Non-Tech : MB TRADING -- Ignore unavailable to you. Want to Upgrade?

To: CanynGirl who wrote (494)	7/12/1998 4:28:00 PM
From: Sword	Read Replies (2) \| Respond to of 7382

Amen on that one. The MMs have a real advantage. For example, on a stock that is dropping fast, a lot of sell orders come into their level III screens. They can see where the stock needs to be to achieve an order balance and they will give you the minimum price they can give. Suppose the market is at 20 1/2 x 20 5/8. A whole bunch of sell orders come in that they have to match. They know that there are a bunch of stop loss orders at 20. The main MM who deals in this stock is the only one left at 20 1/2. He has just executed a SOES order. He legally has 19 seconds to adjust his quote. He sees lots of selling pressure building up but just waits. There is a pause in the market action (the time and sales is quiet as a mouse). He evaluates the situation. Can he make it to 20? All of the other MMs are waiting to see what he is going to do. Bang! The T&S screen fills with blood at 3/8. Downticks again to 1/4. The MMs sell short from their own account. Downticks to 1/8. Fear rises in your heart. You want to get out. You place an ARCA order at 19 7/8, thinking that this will speed up the process by putting you at the top of the list to execute. Ha! No way. The order is preferenced to the top gun MM. He's got a whole universe of Selectnet, brokerage order flow and other orders waiting in the wings. Your order is added to the rest. He gets continually hit with SOES market orders. So he has all the time in the world to balance his account. He'll wait to sell you the shares until the price hits 20 and the bottom drops out with the stop loss orders. The stock dips to 19 3/4. You get executed (finally) at your price. My previous comments about using ARCA on a stock that is about to make a run are not to be construed to mean that it is a good tool for a situation like that described above. In general, I like to use ARCA for "medium to low" volatility situations. -Sword