F***ing around with the Market Makers

Discussion in 'Trading' started by JamesJ, Jun 17, 2009.

  1. JamesJ


    in order to get a good price, i often try to push around the MMs a bit, ie. posting big fake volume in order to get them to move the quote a bit, so that i can get in cheaper or out higher.

    Are there any unwritten (or written) laws, which state you should not do this... ie. will my broker eventually get a call from NYSE/Nasdaq asking me to not post fake volume and pushing around prices?
  2. You mean you posted 100k shares 20 cents out and never gotten filled/partial filled?
  3. bespoke


    that strategy works... until it doesn't.
  4. JamesJ


    well i can give you an example.

    Let's say this stock has around avg volume 5 mio.
    and is trading at 12.45... with bid/ask size around 2000.
    i want to buy, so i post 10k ask size at 12.46, MM and market moves quote to 12.44/45. i post another 10k at 12.45... market sells the 12.44, i do it as long as i feel i can still move it, and i eventually buy my 5k at 12.43 or 12.42... saving me 2 cents.
    i buy and in the same time delete all the ask size.. more often than not the stock moves right back up to where it was before i pushed it down
  5. JamesJ


    absolutely right.

    but it's not bad in terms of market regulation, is it?
  6. only thing that matters as far as being fake is how many orders you send that you cancel compared to how many you send that get filled. this is just a standard part of the game- and as far as it works until it doesn't i have yet to see anyone with real size get picked off in the futures market- and by real size i mean faking like 300-500 us or 800+ tys or 600+ fy's. a few years ago you'd regularly see 3000 lots in the fy or 1500 ty's to fake, don't need to fake that large anymore in this liquidity though.

  7. JamesJ


    thanks for the reply.

    I reckon a ratio fof 5:1 (canceled orders : executed orders) is well within limits...
  8. Some retail brokers get pissed off when you put in bids/offers and continually cancel them.

    Professional platforms with access to all sorts of ECNs don't care.

    But your strategy won't work imo. You're not pushing anyone anyone with 10000 shares on a 5 million volume stock... not even now at 12:25PM EST. Plus the market makers have Level III so if someone with real size was doing that consistently, they would figure it out (for the less thick stocks with volume less than a million).