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To: ROBERT SCHAEFER who wrote (4975)	1/22/1999 5:55:00 PM
From: WHITEAGLE	Respond to of 9824

MM = Market Maker (Legalized Bookie) DD= Due Diligence (Research) George

To: ROBERT SCHAEFER who wrote (4975)	1/22/1999 5:56:00 PM
From: MakeMoney	Respond to of 9824

To "Robert Schaefer". my friend. sure - no problem. "MM" means "Market Maker" - "nasty" people but we need them. they "create" a market for the stock of our companies to be sold in. "DD" means "Due Diligence" - something everyone should most definitely ALWAYS do before they invest ANY of their "hard-earned-$$$" into any company. take care, my friend. God bless.

To: ROBERT SCHAEFER who wrote (4975)	1/22/1999 10:43:00 PM
From: Mykldee	Respond to of 9824

Mechanics of a MM.. > > Another article about MM's=20 > > Market Maker Speaks Out - Ways of a MM (Market Maker)=20 > I was a OTC MM for about 10 years ending in the late 80's. Since then I = > have been strictly an investor. Since I have not been that up to date in = > MM rules I will only make statements that I feel fairly confident are = > still accurate regarding these activities. By and large most MM don't = > have a clue nor do they care to learn, about the fundamentals of the = > stocks they trade.=20 > > They just try to make orderly markets. When dealing with BB stocks it is = > very easy for a MM to get trapped into being short in dealing in a fast = > moving market. Reason being; most of the MM's in this stock are what are = > called "wholesalers" this means they don't have retail brokers "working" = > the stocks.=20 > > So they have to rely on whats know as the "call" from larger retail = > houses. If a "Big" retail firm like an E-trade calls up a market maker = > to purchase say 5,000 shares of a stock, they expect to get an = > "execution" from that market maker. If he turns them down, or only gives = > a partial then the "Big" firm will go to another MM.=20 > > If this second MM "fills the order" then that "Big" firm has a moral = > obligation to continue to give future "business" in that stock to tha MM = > who preformed (his life blood). This will go on until he "fails" to = > perform and so on.=20 > > Contrary to popular opinion the "Big" firms Do NOT neccessarly go to the = > "Low Offer" to fill a buy order (Or high bid for a sell). The "Go" to = > who they think will perform to fill the order and expect that MM to = > "match" the "low offer" in the case of a buy (bid in the case of a = > sell). Even though this MM might in fact be the "high bid" and not = > really want to sell any more.=20 > > As a wholsaler he must perform or he will get a reputation as a = > "non-performer" with the "Big" houses and will cease getting "calls" = > which means he will soon go out of business. I mentioned above that this = > activity is very significant to BB stocks. I say this because most of = > the trades in these BB stocks are "unsolicited" and are done through = > discount houses, ergo "Big" firms.=20 > > With the above groundwork layed, let me try to explain how market makers = > get short even if they like the Company; Lets say that a stock (shell) = > has been lying quitely at $.25 bid $.50 offered. A limit order comes = > into one of the MM's to Buy at $.50 for a thousand shares. Prior to this = > trade that MM may be "flat" (neither long or short any shares). He fill = > the order and is now short 1,000 shares. He may raise his bid hoping to = > find a seller to "flatten" out his position. But before he realizes it a = > wave of buyers have come in and cleared out all the $.50 offers. Now the = > stock is $.50 bid .75 offered. Here comes that "Big" firm he just sold = > the 1,000 shares to at .50 with another bid for 1000 at .75. He makes = > this print. Now he is short 2,000 at an average of .625. The market = > keeps moving and now its .75 bid 1.00 offered. Now he has to make a = > decision.=20 > > Just like investors, MM Hate to take a loss. So 9 times out of 10 he = > will now sell 2000 at 1.00 making him short 4000 but with an average = > .81. At this time he would love to see a seller at .75 so he can cover = > his short and make a few bucks.=20 > > But instead the market keeps moving up. Now it is 1.00 to 1.25 and here = > comes the buyer again at 1.25. He doesn't want to loose the call so now = > he needs to sell 4,000 at 1.25 to keep his break even point above the = > bid. Now he is short 8,000. Market moves up to 1.25 bid 1.50 offer here = > comes the buyer now he feels he must sell 8000 here because "stocks = > don't go up forever".=20 > > Now he is short 16,000. And so on and so on. If the stock keeps moving = > up, before he realizes it he could be short 50k or 100k shares = > (depending how big his bank is).