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

To: Richard L. Williams who wrote (151)	2/3/1999 11:52:00 PM
From: Dave Shoe	Read Replies (2) \| Respond to of 429

I have a pair of questions. I'm trying to learn whether MMs were pushing PAIR down at the end of day today. At about 15:08, when PAIR was jumping back and forth smoothly between bid (10-1/2) and ask (10-9/16), the displayed best bid flipped below the ask (to 10-7/16) for about a minute solid, falsely indicating weakness on the sell side. Within seconds 10-9/16 trades disappeared and all trades came in at the bid (10-1/2) and within two minutes the first 10 7/16 execution came through. Then the chart corrected to 10-7/16 bid and 10-9/16 ask, and started notching down until close. I put a 10-7/16 (bid price) buy for 500 shares in at 15:13, but best bid volume never changed from 200, falsely indicating weakness on the buy side. My trade did not execute for six minutes, when bid dropped to 10-3/8 and ask dropped to 10-7/16. I think I got scalped at the spread. Is it likely that MMs initiated this price fall by erroneously dropping the ask below the bid, and drove the price down by falsely representing the number of bid shares available? Is scalping the most likely reason, or would short-covering be more likely, or is there a more dastardly reason which I can't even yet fathom? (O.K., this last sentence was three questions all strung together, but I swore to myself I'd do everything possible to keep that tacky opener.) My main reason for asking is that if I recognized the bid/ask price inversion as an MM trick, I probably would have delayed my purchase until the smoke cleared. As it stands, the next time I see an inversion, I will consider it a warning, not an anomaly. Shoe.