Fannie Mae-No Politics (FNMA)

[obiterdictum]

OTCQB stock prices rise and fall based on a number of contributing order flows.

There are the actual retail order flows with prices, sizes and type (limit and market orders to buy, sell, short, etc) from broker/dealers that are not processed at the broker/dealer. These retail order flows are to MMs directly or indirectly through another broker/dealer through direct market acess channel (e.g. FIX protocol) subscriptions or payment for order flows. That is, broker/dealers pay specific MMs to take their order flows. Broker/dealers may have one or more MMs, ATSs or routing broker/dealers (wholesalers) that they send order flow to for execution as instructed by the retailer. You can find out where your broker/dealer routes your orders by checking their publicly avaiable SEC Rule 606 Disclosure of Order Routing Information.

This order flow ends up on the order books of each MM in time received order till it is cancelled by the retailer or the end of the day and/or is replaced there again and again if the retail order is GTC (Good Till Cancelled). Otherwise it is dropped. Thus, the MMs can see the full range of retail prices sent to them. Each MM has an order book and then they plan out what to do with their order book in relation to the network of MMs all having different order flows. Thus, different MMs quote differently according the order flows they have to execute. Retailers using broker/dealers cannot see that or know what they are planning.

Now think a moment are you now willing to pay $10 per share? is there anyone on this board ready to pay $10 per share tomorrow? So how will that share price rise? Who will pay that share price later? How does the price move towards $10 and over how many days, weeks, months? Let's go further.

There are other order flows. There are order flows coming to the MMs from institutional clients (mutual funds, hedge funds, pension funds, etc.) who work directly with MMs trade desks or ATSs (i.e. NITE, CDEL, ATDF, ARCA, etc.) using direct market access tradestations or with broker/dealers providing direct market access (DMA) to MMs who then execute orders (and in competition or conflict with retail order flows) according to the clients demands or direct orders using smart routing, manual entry and various types of algorithms.

Here is a look at Goldman Sachs (GSCO) who is a market maker (MM) operating through OTC Markets's OTCQB Tier trading select Fannie Mae and Freddie Mac preferred stock as well as a designated market maker (DMM-GSEC) for the NYSE. Check out the videos like overview, innovation, work simplification.

http://gsetnewthinking.com/site/thinking/overview2.htm

Then there are the MMs themselves who trade for their own accounts and inventories as well as fulfilling their function of making market, buying and selling and providing liquidity so there is always trading going on even it is only between the network of MMs.

So the market participants are retailers, broker/dealers, wholesalers, institutional, ATSs and market makers involved in the OTCQB market where FNMA and FMCC are traded and executed by MMs using the OTC Markets ATS.

Pricing is determined by the actual order flow (changing daily pools of orders with price, size, type, condition) and changing market conditions (events and news, financial reports, economic conditions).

Speaking of "manipulated" price rises, these can occur very easily in any stock where there is a disconnect between company fundamentals and actual market price (Apple is good example of an overvalued equity and FNMA and FMCC are greatly undervalued) because perception is more important and this allows for market condition volatility to enter into pricing and ordering.

To get a price rise, there have to be investors with enough cash willing to raise the share price in a bullish direction by buying shares at an increasingly higher price in randomly sized small orders over a duration of time using a select algorithm AND a significant number of buyers ready to follow their lead or other monied investors similarly interested in contributing to a bullish rise.

So, for example, an investor can own 1,000,000 shares valued at $1,580,000 or $1.58 a share. To raise the share price to increase the value of the holdings, the investors needs only to enlist the aid of an MM as client or to trade directly with an MM through DMA using an addiitonal $165,000 with an aggressive participation algorithm that reads pricing conditions and randomizes small buy orders between 100 to 2000 shares to a maximum of 100,000 shares with gradual increments in price according to quotes and previously executed trades for 30 minutes or less at a selected time of day with positive market conditions (good news) that must include a signficant pool of waiting small order buyers, fewer sellers and significant number of short sellers.

The algo is initiated and increments price quotes and buys automatically in front of lower quotes and trade prices creating an exponential upward curve in price. Quote and chart display observing traders buy in previously at a lower price or increase order flow to buy the wave as it goes up. Short sellers buy to cover to avoid loss increasing demand and price, increments increase and investors and wise traders get out and then greedy and inexperienced traders ride or chase up buying the top or trying to sell the top and then there is a correction downward. So it goes often with FNMA and in the reverse of this.

If for example, the investor sought a .12 (7.5%) increase in share price over 30 minutes, the 1.58 previous close would need to reach $1.70 within 30 minutes. Using a specific backtested algorithm, that could be done by buying 100,000 shares using less than 300 small inconspicuous trades that aggressively increment the price over a 30 minute period. The algo would be set to buy 100,000 shares with participation at an average cost/basis of $1.65 (for $165,000) to complete the order. This would be added to the the 1,000,000 shares to make 1,100,000 shares that can have average cost/basis of $1.586 or $1,744,600 in value. So, the investor buys an additional 100,000 shares that together with the previous holdings has an average the cost/basis of $600 more than the previous close share price (1.58 vs 1.586). However, the price was driven up for a period to 1.70 and will probably correct lower from the high. Even if it bounces and settles at .02 above the previous close the bull investor makes $22,000 over 30 minutes. It could be more if the descent does stops earlier. That is the risk taken and the price depends on what happens after the algo is complete.

If there is holding and there is a plan to set up the day for additional increase, then the next day there will be trader anticipation that the price will go green again. If the bull investor can do the same again to increase the amount and value of the holdings, the price will rise easier as roaming traders and others are alerted to the price increase, volume icreases and this can go on and on until a correction occurs or $10 is reached.

Something like that.

MMs cannot just drive up the price or drive it down as they wish though they can aid in walking prices up and down by encouraging observing traders to do one or another by working the quote displays and making small buys and sells. There are order flows and these are recorded by law and so cannot be ignored. They also are just as afraid as anyone else in not wanting to be a bagholder since they have inventory of the stock they trade from their accounts. The price can drop or rise for a loss for them as it can for all of us.