Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : After Hours Trading(ECN)-The Coming 24/7 Trading Explosion -- Ignore unavailable to you. Want to Upgrade?

To: Richard L. Williams who wrote (75)	4/11/1999 12:59:00 AM
From: brec	Read Replies (2) \| Respond to of 314

A wide spread can result from illiquidity -- little buying nor selling interest, hence few places to reverse (unload) a position -- or from volatility or both. Both increase the risk of a MM (or anyone) in taking a position, whether it be long or short. The perception of increased risk leads to widening of the spread. To illustrate why increased risk leads to a wider spread, imagine that you are a MM in PSAB (Podunk Steel & Bagel) and it's a normal day, nothing unusual, with your quote being 100 1/4 bid, at 100 1/2. You are flat (have no position). Now you learn that the company is about to release very important news in a little while, but you have no idea whether it will be good or bad. Right now, would you change your quote? If so, how would you change it? (This is not a quiz, just a rhetorical question :-) If a taking a position is riskier, you are less willing to take it. You are less willing to buy, so you lower your bid. You are less willing to sell (short), so you raise your offer. Thus you widen your spread in response to perception of an increased risk of taking a position. I have not followed the action in HTSF, but based on your description this stock is both volatile recently (had big moves in the past few months) and has a small trading float.