A very important thing to know about the brokerage world. When I was a series 7 series 63 stockbroker who was very privileged to have my training day with absolutely corrupted criminals. My boss got 22yrs. Fed time. But what I think a lot of people get wrong is the whole shorting thing. It's very important to know there are primarily 2 types of orders a broker sends to the trading desk. 1)as a market maker 2) as an agent or agency. As a market maker you are buying from another brokerage. The one offering you the greatest discount. This is usually between 10% and 50% that they told us anyway. To act as a market maker on a stock that we are not currently a mm on, the floor boss tells you the spread let's say it's a 30% spread then you split with the house newbie 50% so your commission is 15%. Now I could call my client back an quote him 2.5% under ask and make a 12.5% commission. ALL MARKET MAKING TICKET ORDERS ARE MARKED LONG!!! As the commission is locked in. These orders are off the exchange, these orders are handled on the level 2 between the mm. To be a mm we must agree to buy on open market minimum 100 shares at bid. ALL AGENCY TRADES ARE MARKED SHORT. An agency trade is one where there is a set commission let's say $6.95 unlimited. This is not how the brokerage makes its money though. They only make their money if and when the broker can close his short position below cost. For the most part at retail level it's the broker who is on the hook for his short positions he's holding. How well the broker does is based on managing his short positions he has open. For the most part the brokerage is placing a bet against yours, you're playing against the bank.
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