" The following taped conversation illustrates this
type of coordination. On June 17, 1994, a market
maker (Market Maker 1) in the common stock of AES
Corp. (AESC) had an order to buy a quantity of
AESC stock. Market Maker 1 entered a bid of $18
1/4, a quarter point above the other bids in the
market, to attract sellers. Another market maker
(Market Maker 2) had an order to sell AESC stock.
Market Maker 2 called and asked Market Maker 1 to
lower its bid because Market Maker 2 wanted to pay
less for the stock it was buying (as the
counterparty to the order to sell that it had received.
MM 2: I just seen [sic] you go 1/4 bid. Without like
going through a whole bunch of, you know, **** **** I
know I got a bunch of these for sale at the opening. I
would rather buy them at 18, if you know what I'm
saying. If there's a ticket to write, I will write it
with you [meaning I will sell some AESC stock to you if
you are looking to buy some].
MM 1: There absolutely is a ticket to write.
MM 2: OK.
MM 1: I can make a sale at the opening myself.
MM 2: You can?
MM 1: Yes.
MM 2: OK, so.
MM 1: As long as it's -- I can go down . . . .
Trading records indicate that Market Maker 1 dropped
its bid price to $18. Market Maker 2 proceeded to
purchase 8,000 shares of AESC stock at $18. In the
meantime, Market Maker 1 sold 16,700 shares at $18 1/2
to its customer, of which 7,500 shares were sold short.
Market Maker 2 subsequently sold 6,500 shares to Market
Maker 1 at $18 1/4. Market Maker 2 injured the
interests of the seller by asking Market Maker 1 to
lower its bid price so that Market Maker 2 could pay
$18 per share, rather than $18 1/4 (a difference of
$2,000 for the entire trade). Market Maker 1 was also
a participant, since it changed its bid at Market Maker
2's request, to create a deceptive appearance to the
market, and made it harder for th
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