I formulated this in response to somebodies question
despite ECN's and clearinghouses the public relations theory of a mm-which can be exasperating to over the counter longs who have experienced the dozens of ways mm's manipulate the market, is that there wont always be an active market in a stock- especially true in over the counter stocks - sometimes true even when theres a mm.
So when somebody wants to buy or sell there may not be a corresponding sell or buy order out there in cyberspace la la land, so your order would go unexecuted unless mm's MADE a MARKET for the stock by setting their OWN known bid and ask prices -which buyers and sellers can use to inform their decisions and prices. As brokers tell me
mm's buy at bid and sell at ask and the spread is the mm's profit.
So a mm creates liquidity where otherwise might not be any as a middleman to acquire stock and later unload it for a profit
so various mm's have a list of stocks on their cheat sheets that they have chosen to MAKE a market in- do business in- and thus provide liquidity -
cf the variable 10000 grey stocks-so defined because they have no mm and thus little liquidity- where there are buy and sell orders but such orders are often unknown -(why, when we have electronic trading-they apparently arent part of an ecn-which costs money, plus as an interesting aside in 2009 there were still 6 stocks on an old telephone exchange) without a mm, so without a mm there is no quoted bid and ask- no level 2 - so to sell or buy a grey stock you have to sometimes just guess what a corresponding buy or sell order would be and how many shares were in such orders
a question is- with the presence of electronic trading and ECN networks and supercomputers- -why are mm's even necessary?
google provides answers but the market is such a specialized world in itself that certain dark corners really seem dark- esp w all the manipulation-
and the way to make a profit -to steal from your 'fellow' man via specialized knowledge or manipulation is often the real reason why humans unfortunately do anything
So, even without a chill, if a stock has no mm's there will be no level 2 or even level 1 from greys i've seen and no way for newbies to know how to price or set a buy order.
despite ECN's and clearinghouses the public relations theory of a mm-which can be exasperating to over the counter longs who have experienced the dozens of ways mm's manipulate the market, is that there wont always be an active market in a stock- especially true in over the counter stocks - sometimes true even when theres a mm.
So when somebody wants to buy or sell there may not be a corresponding sell or buy order out there in cyberspace la la land, so your order would go unexecuted unless mm's MADE a MARKET for the stock by setting their OWN known bid and ask prices -which buyers and sellers can use to inform their decisions and prices. As brokers tell me
mm's buy at bid and sell at ask and the spread is the mm's profit.
So a mm creates liquidity where otherwise might not be any as a middleman to acquire stock and later unload it for a profit
so various mm's have a list of stocks on their cheat sheets that they have chosen to MAKE a market in- do business in- and thus provide liquidity -
cf the variable 10000 grey stocks-so defined because they have no mm and thus little liquidity- where there are buy and sell orders but such orders are often unknown -(why, when we have electronic trading-they apparently arent part of an ecn-which costs money, plus as an interesting aside in 2009 there were still 6 stocks on an old telephone exchange) without a mm, so without a mm there is no quoted bid and ask- no level 2 - so to sell or buy a grey stock you have to sometimes just guess what a corresponding buy or sell order would be and how many shares were in such orders
a question is- with the presence of electronic trading and ECN networks and supercomputers- -why are mm's even necessary?
google provides answers but the market is such a specialized world in itself that certain dark corners really seem dark- esp w all the manipulation-
and the way to make a profit -to steal from your 'fellow' man via specialized knowledge or manipulation is often the real reason why humans unfortunately do anything
So, even without a chill, if a stock has no mm's there will be no level 2 or even level 1 from greys i've seen and no way for newbies to know how to price or set a buy order.
