One issue you seem to mis-understand is that while a MM is required to provide a valid quote for a specified number of shares, that quote, on either or both sides, IS NOT required to be NBBO. A MM has the ability to quote "away" from the NBBO. Additionally, MM inventory is an aggregate NET position, able to held indefinitely, providing the firms capital continues to support maintaining such position. Further, existing inventory can be added to or reduced at any time, with any applicable transaction (applicable to the net, long or short). The cost basis of say a net long inventory of 1000 can easily be lowered, or the position reversed or flattened in a "crashing hard" market you describe. Experienced MM's have no problem making money when the widget price is moving, up or down, given the rules and regs they operate under and adhere to.
MM’s only have to be the buyer of last resort. They let it crash and others take the hit UNTIL they see buying pressure come in. Sometimes they get caught with their pants down and lose big time. But most of the time their pants stay up. Ours drop in crashes. There are institutions that buy and buy and buy as the market slides. They are bullish ..have large orders to fill..and just figure they are getting in at better prices. Most won’t be that interested in pump and dump penny stocks..but they may do or be involved in some pumping and dumping of their own with a profit in view of course.LOL
I was an Option MM, not equity. I assume Equity MMs have some type of global system to compare baskets of stocks with the ETFs and make small two sided markets around all stocks that they can hedge out market risk with ETFs and futures. They do not take directional bets or have a feeling. It is all data driven. The NYSE specialists back in the day, had a different skill that required tape reading and experiance.
I use to love it when stocks traded in fractions they opened up the spread. I would jump in the middle, and take out a slice of that spread!
Very true. I saw that in the options I traded, especially near expiry with OTM. Often I did not get a fill even when I used "Market"?
Market Makers buy bids and sell offers. That's it. Could be PJM-West forward power options or it could be the ES June-Sept futures Calendar Spread. Exchange sanctioned MM's will stay on the bid and offer and provide liquidity in exchange for a favorable fee schedule and in some cases outright payments by the exchange for new markets introduced by the exchange. Some MM's are merchant extensions of a commercial entity with deliverable inventory, depending upon the instrument.
Because they have the capital to short all the way up and then push it down all the way back down. You are talking about penny stocks. They don't need to be in position for the whole ride ... Load up and distribute ... Doesn't take much to paint the tape so weak money panic all at the same time.
From a book call the Wall Street Gang by Richard Ney. this book is 44 years old. It is somewhat outdated but Wall Street is still Wall Street. "The main job of the market maker is supposed to be keeping an "orderly" market in the stock that he is making a market for. If someone wants to buy the stock that he is the market maker for, he is supposed to keep a supply of stock on hand and sell it to the buyer, if there's no sellers in that stock available at that moment. If someone wants to sell and there are no buyers at that moment, the market maker is suppose to buy the stock If you want to buy or sell large blocks of 1,000,000 etc.shares of stock in a certain company, it is a rule that the market maker be notified in advance of putting your large block of stock to sell or your order to buy on the market. You can't just surprise the market maker with large blocks of stock orders.So the market maker has the inside special privilege to know how much stock people want to buy or sell. With such knowledge the market maker can "move the market" in his stock and increase or decrease the price of his stock based on the law of supply and demand. If he has an order or orders to buy large blocks of stock,he can support the stock and take the price higher knowing that his large block buy order{s} will help him support the price of the stock.If he has large block sell orders for his stock, he can move the price lower knowing that he must eventually fill the sell order for the large block seller. In the course of his buying or selling large blocks of stock, he c News dissemination helps the market maker move the stock in the direction he desires it to gne of the most important rules of The New York Stock Exchange and Nasdaq, which helps the market maker make huge amonts of money, is that when a company has an important news announcement to make that will seriously affect the price of the stock, the company must tell the important news to the market maker {"specialist"} about 30 days in advance of releasing the news to the general public.This is supposedly done to allow the market maker keep an "orderly" market in the stock he trades, but as any stock market professional knows this would normally be considered "insider" information. It is illegal for any ordinary individual to use insider information to make a trade in a stock and profit from knowing the news on that stock before the information is released to the public. WHAT A GREAT DEAL FOR THE MARKET MAKER. He can legally profit from knowing insider information of a cocrooks who control the markets can manipulate the markets to buy stocks at wholesale prices and sell them at retail prices to an unsuspecting public.Some people may have a hard time believing this possibility because they have been programmed by the media that the crooks control, to believe that the stock market is a legitimate market that randomly moves up or down on a daily basis without any influence by anyone. Nothing could be farther from the truth! THESE CROOKS ARE MASTER THIEVES!!!>>> THEY'RE THE GREATEST CON ARTISTS IN THE WORLD!!! In a normal business, when you want to get rid of some product and sell it, you have a sale and "substancially lower the price" of the product you want to sell. In the stock market when the market maker wants to have a big "sale" and cash in the profits that he has made from the stock he has accumulated over a period of time {at lower prices}, he "substancially raises" the price of the stock that he makes a market for so he can easily easily sell his product---stock certificates..In order for him to do this, news stories or analyst recommendations may conveniently appear to get peoples attention. Ordinary unsuspecting investors may get excited to buy this stock as they see the price go up substancially. The market maker then easily sells his own stock that he has previously bought at lower "wholesale" prices. When the market maker Probably the geatest way the market makers and insiders make their biggest profits is by a using an ingenious legal stock trading method called "SHORT SELLING." Whoever thought this one up was a major genius.Very few of the general public are aware that "short selling" even exists.Few if any brokerage firms ever advise their clients to "SELL SHORT." Investors are told how to make money when stocks go up ,but they are not told "how to make a profit when stocks go down." This is like telling a person half the rules in a game of poker or blackjack. The investing public is given only half the rules in the stock market casino, while the market makers play the stock market game with all the crooked rules that they made so they could always control the markets and make huge multi-trillions of dollars for themselves. "WHAT IS SHORT SELLING???," YOU MAY ASK. Short selling allows a trader or investor to make money when a stock's price goes DOWN. "Well how can that be???," you may ask. Very simple and pure genius. Please follow this carefully,because you're not use to hearing how this technique works. When you place a "buy" order for a stock, you are buying the stock with the expectation that the price of the stock will go up and you will then make a profit. If the price goes down you lose your money. When you enter an order to "sell short," you are placing an order to "sell" a stock at the going market price with the expectation that you will make a profit if the stock goes DOWN. Here's how this legal trade works plus wait till you hear how the market makers use this trading technique to really steal your money!!! When you enter your order to sell short, in essence you are selling the stock before you buy it. You are selling stock that you don't own. "How can you sell something you don't own," you may ask??? Now this is pure genius and you've got to hand it to the MASTER CROOKS OF WALL STREET. THESES CROOKS HAVE MADE A RULE THAT YOU CAN SELL SOMETHING YOU DON'T OWN. After all it's all only worthless paper stock certificates , so what difference does it make??? Here's how it works. You sell the stock at the going market price and temporarily borrow the stock from a brokerage firm, who will temporarily "loan" you the stock the stock they have on hand, so the stock can be legally and officially delivered to the buyer. "But how do you make money selling this stock short???," "you may ask. After you have sold the stock and temporarily borrowed the stock and the stock was delivered to the buyer, you must now pay back to the brokerage house the stock that you "borrowed." Let's say you sold 100 shares of xyz stock "short" at $100. The stock goes DOWN to $50.You are obligated to pay back the stock you temporarily borrowed from the brokerage house.You now go into the market and "buy" 100 shares of xyz stock at $50 and your stock is given back to the brokerage house that you borrowed it from. You've completed the trade and made $50 per share or $5,000. You simply did a buy/sell trade in reverse. You first sold and then bought. If the price of the stock would've gone "up" you would have lost your money.To put it another way,you bet that the price of the stock would "go down" in the stock market casino and you WON. But wait you ain't heard nothing yet. If you're a market maker you can "go naked" as they say and sell a "worthless paper stock certificate" without even going to all the trouble of borrowing it. I hope you're starting to get the picture. While all the suckers are happily and frantically buying overpriced "worthless pieces of paper" at extremely high prices as in the bull market of 1999-2000, the market makers {specialists} were all busy "selling" you your stock that they didn't even own>>>the market makers were, that's right everybody, the market makers were 'selling short naked." All the news media that Wall Street controls was being utilized to get ordinary investors or pension funds or mutual funds to BUY BUY BUYstock while the market makers were "selling short." Stock market analysts working for the crooked investment bankers and brokerage houses were telling their clients to buy sto If you wanted 1000 shares of xyz stock at $200, no problem, here's a thousand shares for you, SUCKER.You can buy this 'worthless stock certificate" in a new dot.com company that had very little sales and was not making any money. The "paper value"of the dot.com company may have been a billion or two billion dollars or even more {number of shares outstanding multiplied by the price of each share of stock}. Remember,the market maker did not have to legally own the stock he sold you. He wouldn't be foolish enough to pay high "retail prices" for a "worthless piece of paper." After he got your money, he could wait a few months or a year or more and "cover" his short sale by buying back the xyz stock at "wholesale'" prices of let's say $5 a share and make a profit of $195 on each of the 1000 shares of xyz stock that he sold you at $200 a share, for a total profit of $195,000! Remember the job of the market maker is to keep an "orderly" market in the stock that he makATT etc.} , continue to go even lower. THE WALL STREET GANG IS GETTING AWAY WITH A THEFT OF TRILLIONS OF DOLLARS AND NO ONE IS GOING TO JAIL!!! Can you imagine how many billions of dollars the Wall Street Gang made in Enron, Worldcom, Global Crossings, Juniper Networks, Lucient and all the other Corporations whose stocks went DOWN from the highs of $50, $90, $200 to their present price of 6 cents to $5??? TRILLIONS OF DOLLARS WERE STOLEN BY THE WALL STREET GANG BY THEIR USE OF "SHORT SELLING TECHNIQUES." If the unsuspecting pulbic would wake up and demand an outside uncorrupted public investigation into the stock, bond, commodity and currency markets and see the truth about what is going on, they would be so appalled and so shocked, one would not even want to guess at what they might do with their anger!!! Forget about any government investigation, THE CROOKS ARE THE GOVERNMENT>>>The President, Vice President, Congressmen, Senators, the head of the Federal Reserve>>>they're all in on it. You don't have to believe this, just have a major citizens investigation and let's see what we find. After all Enron is real and many thousands of people lost billions of dollars of their money to the crooks in Enron. Is the former C.E.f Enron, Ken Lay,{Kenny Boy as President George Bush calls his friend} in jail yet??? President Bush has even tried to get legislation approved that would allow the American taxpayers to be able to "invest" their hard earned soc When all was said and done, the public, pension funds and mutual funds lost multi-trillions of dollars in the bull market of the latter '90's, and continue to lose even more. In a casino when someone loses the casino wins. THE WALL STREET GANG WON TRILLIONS OF DOLLARS OF THE SUCKERS MONEY.They will continue to win and get away with their crimes as long as people don't know the truth. " From a book call the Wall Street Gang by Richard Ney. this book is 44 years old. It is somewhat outdated but Wall Street is still Wall Street. with additional comment by Michael Shore
That's why they eliminated it cuz people like you were taking too much slices of that spread, cutting into those MM's fat profit.