Reliability of Market Maker Friction analysis...

Discussion in 'Trading' started by Option Trader, Jun 17, 2009.

  1. 1) What is your opinion about the reliability of this analysis?
    2) Are the market makers running any risk to violate the rules?

    BUYINS.NET: WLL, XTXI, BZH, ETFC, CTIC. Abnormal Price Friction In Morning Trading Session Today
    Wednesday June 17, 2009 10:48:49 EDT
    Jun 17, 2009 (M2 PRESSWIRE via COMTEX News Network) --
    BUYINS.NET,, announced today its proprietary Market Maker Friction Factor Report for June 17, 2009. Since late October market makers are now required to be on the bid as much as they are on the offer and for like amounts of stock. This fair market making requirement is designed to prevent market makers from manipulating stock prices. Here is a list of the companies with Abnormal Price Friction (unfair market) in their stock prices in todays trading session. This means that there was more buying than selling in the stocks and their stock prices dropped. Whiting Petroleum (NYSE:WLL), Crosstex Energy (NASDAQ:XTXI), Beazer Homes (NYSE:BZH), eTrade Financial (NASDAQ:ETFC) and Cell Therapeutics (NASDAQ:CTIC). To access Friction Factor, Naked Short Data and SqueezeTrigger Prices on all stocks please visit

    Market Maker Friction Factor is shown in the chart below:

    Symbol Change % BuyVol Buy% SellVol Sell% NetVol Friction

    WLL -$3.59 -8.77% 264,910 38.57% 264,465 38.50% 445 abnormal

    XTXI -$0.33 -6.95% 78,724 54.52% 65,673 45.48% 13,051 abnormal

    BZH -$0.23 -9.58% 314,608 51.14% 249,427 40.54% 65,181 abnormal

    ETFC -$0.19 -11.52% 9,257,876 55.64% 7,443,542 44.74% 1,814,334 abnormal

    CTIC -$0.15 -9.68% 4,279,702 50.31% 4,226,384 49.69% 53,318 abnormal

    Click here to view chart:

    Analysis of the Friction Factor chart above shows that each of the six stocks mentioned above had more buying than selling on Tuesday, June 16th, 2009 and their stock prices dropped. The Friction Factor displays how many more shares of buying than selling are required to move a stock higher by one cent or how many more shares of selling than buying moves a stock lower by 1 cent.

    For example, the chart above shows ETFC with 1,814,334 greater shares of buying than selling (NetVol) and the stock price is down -$0.19. This means the Market Makers were trading the stock in a way inconsistent with normal supply and demand (Economics 101); more buying than selling should cause prices to rise.

    Whiting Petroleum Corporation (NYSE:WLL) engages in the acquisition, development, exploitation, exploration, and production of oil and gas primarily in the Permian Basin, Rocky Mountains, Mid-Continent, Gulf Coast, and Michigan regions of the United States. As of December 31, 2008, its estimated proved reserves were 239.1 million barrels equivalent of oil. The company had interests in 8,871 gross productive wells. Whiting Petroleum Corporation was founded in 1983 and is based in Denver, Colorado...
  2. Corey


    Call me stupid, but doesn't it just mean that there was demand at a lower price?
  3. piezoe


    So are you saying that when there are more bought by customers than are sold by customers, and therefore the market maker is selling more shares than they are buying, all over some arbitrary time period (that is not stated) that the price should rise, but if fact fell???????????? I am with stupid above. It seems that during the time period (the unstated time period) that as the price came down, demand went up, so that more shares were sold at the lower price, but customer sellers were not stepping in at the lower price so the market maker was selling from their account at a lower price. What's wrong with that. I mean if a market maker was involved the shares probably don't exist anyway. :D

    Oh, nevermind, you have given me a headache with the friction stuff..
  4. My vantage point: Market makers are often the counterparties to your trades when you buy at some higher prices, and if we see they are able to manipulate the stock down freely by showing stronger ask than bid they are almost ALWAYS the winner. You make $ ONLY when you sell to another retail trader at a profit, but ultimately the Market Maker is almost ALWAYS the winner.