NYSE MARKET MAKER
Very interesting read on a personal experience with specialists from the NYSE. ..."I spent Monday on the floor of the NYSE courtesy of a major brokerage firm The most educational part of the day was spending 20 minutes at a market maker's kiosk Market makers make their living 'creating a market', regardless if one exists or not. They have to sell their 'inventory' of stock if there are buyers and they have to buy stock if there are sellers. What am I saying? When there are no sellers, they create sellers by lowering the stock price after they have "shorted" the stock at higher prices. Doing this provides them an inventory of stock to manage the market they are tasked to create. They had sophisticated analytical tools to help them pick their best entry and exit points. The thing that shocked me most was that they generally work with the company to create a market. They said they are not the first to know, OR are they the lasts to know when companies make major announcements. This allows them to "manage" the market they create. The 'controlled' collusion between the company and its MM's was an incredible revelation to me. What I envisioned to be a firewall was in fact an access panel. Bottom line, you can expect MM to lower a stock price aggressively some time prior to a large event or release. This will allow them to gather an inventory of stock from weak hands, which they can sell, into the rally for a profit. If you DON'T sell your stock during this period of artificial weakness, they will not be able to lower the price. This will make the UPSIDE move during a PR or release MUCH MORE EXPLOSIVE.
I have been investing successfully for a long time. This was the most eye opening experience of my 19 year investing career. Maybe some will say I am naive - but actually seeing it happens right in front of your eyes puts it all in a new perspective. I thought I'd share it with everyone on this board. This will forever color the way I look at price and volume movements...particularly in the absence of company news. One final point. I was observing the NYSE. I was told the MM has even more "flexibility" on the Nasdaq. "
special thanks to all the elf's friends
blue elf designs
the posse
