What exactly do the market makers in Nasdaq Stocks do? Do they fill orders for their clients, and if so, WHO are their clients? Do they trade for their own account on the side, at the same time? Also, there are over 4000 Nasdaq Stocks ... how many stocks does your average MM watch, or is the majority of stock trading done by a computer, most of the time? I'm just wondering what the REAL STORY behind the market makers is ... anyone know, anyone care to tell us more about a day in the life of a Nasdaq MM?
Market making is almost extinct. Now Big Market Makers are order clerks 90% of the time. Bulge Bracket desks are not throughing around the capital of the late 90's very much these days. The majority of NASDAQ is done with mark-up mark-down without risk. Lets give this 10minutes for a contradiction or attack! 4:03PM
Market making is still alive, just now being done by direct access daytraders as opposed to firms. Seems like the firms stepped out when the profits became less guaranteed and daytraders came in to fill the void. No reward without risk. In addition, the professional daytrader works without the benefit of customer flow, which I think tells a great deal about the talent of the trader vs. an MM at a big instit firm. The myth that there is no money to be made taking propietary positions is just that, a myth. Proven wrong every day by the successful trader.
my 2 cents... OTC MM execute for both their own account and for customers orders. I would say everyone is correct in that they are not playing the positions as much as they were 4 years ago, when everyone was a genious going long .coms. They make money these days by posting .10 bids when you give them a .11 bid to handle. They purchase for .10 and flip it to you for .11. Then they solicit every client they think likes this stock and shop out your order. If they are good they will post 2 sided tight markets and trade, add liquidity and chance the positions.