Michelex Corp (fka MLXO)

[sawdin]

I believe that MM's can still use obfuscation. Here's an example from Investopedia:
MM tricks

Nasdaq market makers, routinely take positions in stocks, both long and short, and then turn them around for a profit, or a loss, later in the day. They provide liquidity, but they are also more focused on capitalizing on your lot of stock by buying it for their own trading account and then flipping it to another buyer. In any case, market makers will sometimes post phony sizes in order to lure you into buying or selling a stock.

For example, market makers may post a bid and an offer that looks something like this:

$10-$10.25 (75x10)

This means that they will buy 7,500 (multiply 75x100) shares of your stock at $10 per share and they will sell 1,000 shares of stock at $10.25. They are obligated under Nasdaq rules to honor those sizes. However, there is a chance that the market maker already owns a position in the stock, and by posting a bid for 7,500 shares, he is merely looking to fool brokers and investors into thinking that there is big demand for the stock and that it is moving higher. (To read more on this subject, see Electronic Trading Tutorial and Markets Demystified.)

Note on this subject: While actions such as this may be frowned upon by the National Association of Securities Dealers (NASD) - they are still fairly common in practice. Also, if someone tries to sell 7,500 shares to the market maker, he must buy them because his bid is posted.

So what happens? Most brokers will simply pay $10.25 for the stock just to get the trade done, but in reality, the purpose of posting a big bid was to sell the market maker's 1,000 shares at $10.25 to the unsuspecting broker. The trick worked! Incidentally, the same trick can be used in reverse on the sell side of the equation. The market maker may show a big offer of say 10,000 shares. Brokers see this, think that the market maker is looking to unload a big block of stock, and quickly sell their shares at the bid price (which, using the above example, is $10). In this case, the trick works again because the market maker fools the broker into selling his shares at $10, precisely where he (the market maker) wanted to buy them.