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Non-Tech : Market Makers - What They Do and How They Do It -- Ignore unavailable to you. Want to Upgrade?

To: jjs_ynot who wrote (1)	1/17/1999 8:15:00 PM
From: eWhartHog	Read Replies (1) \| Respond to of 429

dave, It should be noted that this article was published in August, 1993, and subsequent changes in order handling rules have somewhat reduced marketmakers' ability to benefit at the public's expense. These new rules were referenced in your post #8 on this thread. #reply-7328876 The abuses described in the Forbes article resulted in litigation and a $1 billion settlement funded by marketmakers: nasdaqlitigation.com As part of the settlement, they all promised to be good boys in future. Regards, John

To: jjs_ynot who wrote (1)	1/18/1999 5:59:00 AM
From: john rieck	Read Replies (2) \| Respond to of 429

placed a market order for RMII through Ameritrade after Kernan said they'd be on Squawk awhile back. Last quoted price was in 19s, NITE sold it to me for 26...what happened here?

To: jjs_ynot who wrote (1)	1/24/1999 9:42:00 AM
From: Doug Coughlan	Read Replies (1) \| Respond to of 429

Thought this site might be of interest to this thread. It is from Allstocks.Com and lists all of the Market Makers along with their telephone numbers, etc. allstocks.com

To: jjs_ynot who wrote (1)	11/1/1999 8:51:00 AM
From: Doug Coughlan	Read Replies (2) \| Respond to of 429

This was published by Briefing.Com today. Thought people who frequent this thread would find it relevant. I only posted his piece on market makers. [BRIEFING.COM - Robert V. Green] Chat rooms are a great place to get a feel for the sentiments of other investors. But relying on chat rooms as a solid source of information about your investments is often a mistake. The possibility of misinformation is high, particularly if you have not developed a "relationship" with the person who is posting. Here's a brief list of some of the more common comments that are misleading. The Market Makers Are Screwing Us! There is no question that market makers have a great deal of advantage in trading stocks. But market makers have nowhere near the amount of control that chat room writers attribute to them. Although market makers always have the ability to make money off of market orders, they cannot control the placement of limit orders. If everyone only used limit orders, market makers would have absolutely no control over the price of a stock. The only time market makers can influence the price of a stock is when market orders are placed. When market orders are placed, the market maker must fill the current BID or ASK order they receive, up to the amount of the BID or ASK size placed. After filling the SIZE, they are free to make purchases or sales by adjusting the BID or ASK to any price they want. But every execution comes only when they post a BID or ASK price. This means they constantly adjust the price of their current BID or ASK based upon the order stream they see on at Nasdaq Level II. As each BID is filled, for a current market SELL order, and there are more SELL market orders in the queue, the price drops. An overabundance of market Sell orders is what drives prices down. Normally, market makers are attributed with "driving the price down" during the opening half-hour, to "pick up shares cheaply." There are plenty of charts you could point to that support this viewpoint. But the only way prices decline like this, is when sellers place market orders. Lowering the BID does not force anyone to SELL their shares. And you can't blame market makers for decreasing the BID when there is a huge crowd standing in front of you screaming sell, and no one screaming buy. Market makers admittedly, by virtue of their position in the market, have an advantage. They are watching the flow, and volume, of orders in the queue. If BUY market orders equaled SELL market orders all the time, the market makers can make the spread continually, without any risk. They don't need price movement to make money. So when you see a chat room entry like "Market makers driving the price down!" because of a sudden sharp decline, check the transaction history. It is almost always an overwhelming list of transactions at the BID, or market orders. What it really means is that a lot of other people have decided the stock needs to be sold, immediately! Rather than blame market makers, you would be better off wondering why those other people think that way. Lastly, try finding a chat room entry that blames a sharp upward price rise in the first half-hour on "market makers driving the price up! - Hoorah!" You won't find it. They get blamed only for the declines. Yet if they had the ability to control the downward price movement, they would surely control the upward movements as well.