When a MM sells at an inferior price

[Don Bright]

A couple of things...were the sales on the way down Short sales, or was he hitting bids (or uptick bids on the Naz)? If long stock going down, there was probably just a size order being handled by a less than competent MM. If short sales, then they were simply making profits for their own accound, leaning on another order.

Illiquidid Naz stocks can be pretty much moved around at will, and this is yet another reason to steer clear of them. Even when you think you have some justification for trading them (support levels, etc.), you still have to contend with this sort of thing.

Not to "beat a dead horse" but if this same scenerio were to happen on a listed stock, the Specialist would have negotiated the trade for all the stock, at a fair price, given the buyers "price improvement" and gotten it over with.

Hope it didn't cost you any money!!

Don

 

[Vinny1]

Don,what if there are no buyers on an illiquid listed stock...if the specialist has to buy all the stock,the seller is going to get a bad price...so one side always gets screwed.

 

[dgabriel]

Bung the thing about the Naz stocks is there are many different participants operating independently without the requirement of going through a specialist. The big prints you witnessed .05 below the ask don't have to be coming from any MM on the inside or close to the inside on the Level2. A different MM could have matched a trade in house and just be painting the tape. Could be late prints also. Also .05 is not much variance on an illiquid Nas stock.

 

[bungrider]

Originally posted by dgabriel
A different MM could have matched a trade in house and just be painting the tape.

This is true...either that or some of the trades were from ISLD hidden orders...I matched the offer using ISLD myself, showing more size than anyone else, and lots of shares traded at my price without touching my order, so........who knows...

Anyway, thanks for responding, Don. To answer your question, the offer kept stepping down, not hitting bids, until it rested at a recent support level, and the seller only showed 100sh and kept refreshing. And blocks have been going off at the seller's price, as well as about a nickel below it.