Market Maker Collusion

Discussion in 'Trading' started by kean, Feb 6, 2003.

  1. On Sterling Software, which is leased to a few prop firms, and on other systems like SLK's Redi+, you can set up a purchase hotkey like:
    "Ask+.01" or "Bid+.01".

    If you carefully watch the B/A spread you'll see those fraction of a cent price improvements used to jump in front of a speading freight train. Nothing special with that scenario, just a means of scalping.

    Take this concept one step removed, and realize that in order to achieve the initial scenario (that started this thread) there would have to be 1 MM to set the pick and others to already be positioned to advantage the setup, whilest the original MM changes, cancels his "shot calling" B/A, and then begins to trade in the "projected" direction.

    Simply put, this is not the parlance of just one trader within a shop, or just 2 traders in 2 shops, its the parlance of a few traders within one shop, and the same at the other shops.

    Collusion or not, there's evidently something to this story, or its just fantasy.
    #31     Feb 9, 2003
  2. Tide31


    I've seen a couple replies here that hit it right on and some that were way off. As a former Market Maker I can tell you that the last thing you want these days is to 'tip' your hand to other MM's (driving the price higher doesn't make any sense if you have a buyer - everything is facilitation these days and doesn't require a lot of capital commitment). 'Ghost bids' used to be used to scare people into your seller or vice-versa (they are now illegal by MM's and looked for by NASDAQ market survellance). If you still see them they must be non-MM's trying to scare people into trading in that direction. NYSE spec's are a different animal. Yes, 1000x1 often means that the spec is long or is a legit signal that there are buyers and no sellers (depending on the spec). Often trying to hit that bid - it will mysteriously be gone without ever having traded! For guys that trade NYSE a lot, I strongly recommend getting the openbook if it is available on your quotation device. It's a lot harder to 'manipulate' the actual specialist book. The market on the screen is totally discretionaty according to his 'feel' for the crowd.
    #32     Feb 9, 2003
  3. Well perhaps YOU didn't see (if you are too small) but perhaps others do :D In France, where french equivalent of "SEC" have the bad reputation of being useless, MMs were surprised to have made alliances On MONEP (the options market; and this can be even read in a well known options book in France) so they had changed the law pretending to better protect the public rights but they in fact do it in the way that they can now make alliances without being discovered easily hahaha ! It's now a bit like the infamous chinese wall between the corporate department and the sellers department that is so thin that it doesn't exist in practice :). The huge difference now impacts the options market which had become very illiquid relatively (I have known MONEP before and after the change. Before I could daytrade on Monep easily since the liquidity was as good as future now it has become impossible). So the alliances must have been worst after the law changed but legally it is more difficult to prove it.

    French banks had also paid 1 billion francs of damage because justice has proof that they collude on credits for house hold market but only 10 years after the fact. Collusion is more for big operators because they can enforce the law more easily (in fact they are the expert called to make the law so ...). Above all, nobody can expect big operators to collude thinking that they fear scandal. But 1 billion francs is nothing compared to the gain they have made above all when 10 years have passed they know the public wouldn't feel concerned after such a long time. Also they control the medias indirectly through advertsiment budget (for example although it is not a bank, LVMH CEO has retired his budget for a magazine because a journalist had criticized his strategy). This story only appeared briefly on a few medias and among many others of course.

    #33     Feb 9, 2003
  4. You're not crazy. There must be hundreds of illegal ways MMs can signal to each other.

    Signals like yelling on the telephone "moo goo gai pan" are so rude and crude and obvious that even the dumbest and least experienced SEC bureaucrat can notice them easily. But how about signals that are a lot less obvious?
    #34     Feb 9, 2003
  5. Here´s a lovely online tutorial I´ve found about signalling:

    "An Introduction to the Theory of Honest Signalling"

    It´s written on a rather philosophical than mathematical level - signalling theory is a subtopic of game theory.
    #35     Feb 9, 2003
  6. tampa


    I don't know about you guys - most seem to think that the market is full of bad people out to screw you - evil MM's, ruthless Specialists - and yet you keep on coming back for more!

    If the "market" is run by these bad people, why not trade in a more friendly environment - perhaps baseball cards, or collectable Avon bottles?
    #36     Feb 9, 2003

  7. Glad to have your comments enlighten us.

    After all we're all searching for profits, and in this case, my profits are still in the other guy's accounts.
    #37     Feb 9, 2003
  8. Nah, it's not about seeing bad people; it is about seeing a good and legitimate opportunity where others see bad people and negativity.
    #38     Feb 9, 2003
  9. Niceeeee
    Very nice website, with excellent content. Was this the by way of introduction thread?
    #39     Feb 9, 2003
  10. my thoughts exactly...

    #40     Feb 9, 2003