Can you prove your comment? As I disagree. My posts prove that at least one MM must be there making the market for that stock, even when there are no buy or sell orders from the street. That single MM sets the spread. It is that MM's job to make the market, to place a bid and ask, even if he has no orders.
In a thinly traded stock, the MMs can wreck having, running the price up and down just to try and attract volume.
Can you prove that MM's are not trading this stock for their own account?
Volume manipulation is a type of "pump and dump" scheme orchestrated by and for the benefit of the Market Makers themselves. It works like this: The Market Makers start selling to each other to artificially inflate the volume figure over a period of days to generate investor interest, but they do not yet start Naked Shorting. Now after some number of investors have laid down their hard earned money and there has been some price appreciation, Market Makers then start to Naked Short the position, effectively capturing the Investors Money, as price erodes due to the dilution that the creation of the short positions cause. This capture of investors money occurs in the event the investor has a stop loss figured into their trading strategy which mandates them to limit their losses, so they sell due to price erosion caused by Naked Shorting. Stop loss's are always recommended in beginner's guides to technical analysis and automated trading strategies.
I wonder why?
In any case these stop loss strategies combined with the flawed reporting structure of the real time price stream, line the Market Makers pockets with huge sums of money.
Thomas Jefferson once said something to the effect: "Any man has the right to swing his arm as far as the next mans nose, but no further." Allowing large and sophisticated portfolio holders to short against a stock I hold long as a hedging tactic when shares of another companys shares are the other leg of the said hedge, and further which has the effect of causing my stock holdings to tick downwards, is a violation of Thomas Jeffersons idea. In a similar fashion so does Naked Shorting. Namely, that sophisticated hedging and Naked Shorting tactics "extend their arms into and through my nose." These types of tactics should be stopped since they run counter to the ideals of the vast majority of Americans, and the spirit, if not the letter of the law, as envisioned by our Founding Fathers. No one should be able to sell what they don't own, only what they do own!
To sell something before it's purchased is not a stock sale, it's a hybrid stock/futures transaction, since the timeline is artificially reversed. It's nothing more than a promise to purchase at some time in the future, and in the OTCBB the suspicion is that it's often later, rather than sooner. This contrasts with what release No. 34-42037 suggests about short selling: The buy to cover is "usually the same day the purchase of the short sale is executed." On the other hand, an outright stock buy carries no implication to sell at any time in the future, and the same can be said of a normal sell when the buy occurred first...no further obligation to buy or sell further.
The current practice of Naked Shorting and also Hedging calls into question the entire ethics of our legal system as it relates to the purchase and sale of a company's stock.
Why do you allow the Market Makers, when acting in their roles as "bona-fide Market Makers," the right to short a stock without even an affirmative determination of the existence of shares to short against?
This activity of Market Makers essentially makes counterfeit shares of a company, then introduces them into the supply demand equilibrium of any particular stock in order to deflate or dilute the current value of each share held by shareholders. It's stated that this is done so that investors aren't forced to pay artificially high prices during short and temporary supply demand imbalances.
Why aren't Market Makers required to be responsible to the Company and it's shareholders with respect to an accounting of the Short Interest in real time held by Market Makers?
There is no oversight currently that insures that Market Makers are covering their short sales when the temporary order imbalance is corrected. It appears to many OTCBB traders that the Market Makers are keeping their short sales many days before covering. A similar suggestion was made as documented in the SEC Release No. 34-42037, File No. S7-24-99 in the sections C, Previous Reviews of Short Selling, item 3, 1991 Congressional Report on Short Selling, specifically numbered items (7) and (8). This lack of action from the SEC has let the Market Makers dictate the supply and demand for any given stock they make a market in and thereby they also control or "manipulate" the pricing of each and every share, for extended periods of time.
"Section 10(a) of the Exchange Act gives the Commission plenary authority to regulate short sales of securities registered on a national securities exchange, as necessary to protect investors"
If this is so, why aren't the short sales of OTCBB stocks regulated by the SEC?
The SEC has allowed the OTCBB market to be self regulated by the NASDAQ, who in turn allow Brokers for OTCBB stocks to have "run away" naked shorting. I presume it has been convenient for the Market Makers that the SEC has not determined that the OTCBB is a "national securities exchange." The inmates are running the asylum, and the SEC needs to wake up.
A market maker is a bank or brokerage company that stands ready every second of the trading day with a firm ask and bid price. This is good for you, because when you place an order to sell your thousand shares of Disney, the market maker will actually purchase the stock from you, even if he doesn't have a seller lined up. In doing so, they are literally "making a market" for the stock.
How do Market Makers make their Money?
Market Makers must be compensated for the risk they take; what if he buys your shares in IBM then IBM's stock price begins to fall before a willing buyer has purchased the shares? To prevent this, the market maker maintains a spread on each stock he covers. Using our previous example, the market maker may purchase your shares of IBM from you for $100 each (the ask price) and then offer to sell them to a buyer at $100.05 (bid). The difference between the ask and bid price is only $.05, but by trading millions of shares a day, he's managed to pocket a significant chunk of change to offset his risk.
Ambition with out knowledge is like ship in dry dock. Going nowhere fast!
