an interesting discussion, yet fundamentally where is the proof this occurs ? talking to market makers they all tell me simply they are not in the business of taking risks like this though they may do so knowing a client may bail them out, or that as favor parking a trade in some fashion.
take a stock with a .03 bid and .05 ask. volume buyer comes in at 05, they figure they can sell to that buyer, and somehow cover themselves at .03- maybe they have a customer they know would sell at that price, who might do for a favor or whatever
i guess to be convinced i simply would be interested in a factual example of this.maybe there is, i just havent seen it.i have sen fail to delivers for many other reasons than someone shortng the stock- sometimes sheer inefficiency of smaller brokers for example.
and idea average market maker would run around bad mouthing a stock to drive price down ?
just out of curiosity haev you ever had this discussion with an actual market maker ?
with all respect though i appreciate your comments as this urban legend i have been hearing about for years.
