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Microcap & Penny Stocks : THNS - Technest Holdings (Prev. FNTN) -- Ignore unavailable to you. Want to Upgrade?

To: TsioKawe who wrote (5904)	9/15/1998 6:53:00 PM
From: Bill Fortune III	Respond to of 15313

Greetings TsioKawe, Great Information and as you said "Here is a fine article on the Market Makers Market Making" you are absolutely correct. Thanks! Best regards, Bill Fortune III I am posting an excerpt from it but folks even though this is a very long article it is worth reading in its entirety. It can be found here as TsioKawe pointed out: www3.techstocks.com or here Interesting article on MM Games; forbes.com as post on 5/29/98 by Malcolm Part of the article follows: It's not our fault if Nasdaq trading costs a bit more for individual investors, says Nasdaq. James Spellman, spokesman for the National Association of Securities Dealers and Nasdaq, says spreads have increased in Nasdaq stocks in recent years because a group of nondealer firms is "arbitraging" momentary and minute discrepancies between dealer bids and dealer offers. They do this, according to Spellman, by placing orders electronically on a system called Small Order Execution System, or SOES. Spellman says these dealers, which other marketmakers derisively call "SOES bandits," have forced genuine marketmakers to widen their spreads to cover SOES bandits' costs. Nice try, but that's only a small part of the answer to why Nasdaq spreads are higher. For starters, these SOES firms aren't taking advantage of Nasdaq price discrepancies, they are trying to catch trading trends. Furthermore, these 18 firms can place only four SOES orders for 1,000 shares per customer per day; their numbers are miniscule compared with regular dealer and customer trading of some 240 million shares on a typical Nasdaq day. Why hasn't competition narrowed the Nasdaq spreads? Cut through the rhetoric and this is what you discover: Nasdaq is more costly for investors because the dealers work together to keep it that way. As one cynical o-t-c trader points out: "In the over-the-counter market, the competition is between the dealers and the customer." Note this: Bid and asked prices on Nasdaq stocks rarely vary from dealer to dealer. Most Nasdaq stocks have a dominant dealer, who is, in some ways, comparable to the Big Board specialist. When that "specialist" moves his bid -- in trading lingo this dominant dealer is known as "the name" -- the others almost invariably follow. Some firms have their workstations programmed to ape the bid and offer quoted by the name. Novice traders learn quickly that if they want to keep their jobs on an o-t-c desk, they will do well not to beat the price of fellow marketmakers. "Breaking the spread," as it is called, just isn't done. One veteran, who tried on occasion to narrow an o-t-c spread, told Forbes: "I used to get phone calls from people; they'd scream, 'Don't break the spread! You're ruining it for everybody else!'" Another trader who tried something similar said: "My phone lights up like a Christmas tree. 'Whaddya doing in the stock? You're closing the spread. We don't play ball that way. Go back where you belong.'"

To: TsioKawe who wrote (5904)	9/15/1998 6:57:00 PM
From: Radim Parchansky	Read Replies (3) \| Respond to of 15313

MM's could be trading FNTN ahead of investors. The size is not consistent with the price change especially for price going down vs up. Radim

To: TsioKawe who wrote (5904)	9/15/1998 7:59:00 PM
From: Radim Parchansky	Read Replies (1) \| Respond to of 15313

MM's make money on spreads and number of trades or commissions. If the volume is low then all what they have is the spread, so they try to widen it. They have to directions up & down. In the absence of news their chances are higher for the down side and by lowering the bids they win two ways - one the spread is larger and second they make investors believe that something is wrong. And how do they justify lowering the bid? With every trade no matter how small they push the bid down. This is just one possible scenario but explains tendency to move in certain direction despite of different trade sizes. Radim