Replies to post #2552 on Radix Marine Inc (fka RDXM)

[bb72mo]

Education - FAQ's - General
By and large most MM don't have a clue nor do they care to learn, about the fundamentals of the stocks they trade.

They just try to make orderly markets. When dealing with BB stocks it is very easy for a MM to get trapped into being short in dealing in a fast moving market. Reason being; most of the MM's in this stock are what are called "wholesalers" this means they don't have retail brokers "working" the stocks.

So they have to rely on what's known as the "call" from larger retail houses. If a "Big" retail firm like an E-trade calls up a market maker to purchase say 5,000 shares of a stock, they expect to get an "execution" from that market maker. If he turns them down, or only gives a partial then the "Big" firm will go to another MM.

If this second MM "fills the order" then that "Big" firm has a moral obligation to continue to give future "business" in that stock to that MM who performed (his life blood). This will go on until he "fails" to perform and so on.

Contrary to popular opinion the "Big" firms Do NOT neccessarily go to the "Low Offer" to fill a buy order (Or high bid for a sell). They "Go" to who they think will perform to fill the order and expect that MM to "match" the "low offer" in the case of a buy (bid in the case of a sell). Even though this MM might in fact be the "high bid" and not really want to sell any more.

As a wholesaler he must perform or he will get a reputation as a "non-performer" with the "Big" houses and will cease getting "calls" which means he will soon go out of business. I mentioned above that this activity is very significant to BB stocks. I say this because most of the trades in these BB stocks are "unsolicited" and are done through discount houses.

With the above groundwork laid, let me try to explain how market makers get short even if they like the Company; Lets say that a stock (shell) has been lying quietly at $.25 bid $.50 offered. A limit order comes into one of the MM's to Buy at $.50 for a thousand shares. Prior to this trade that MM may be "flat" (neither long or short any shares). He fills the order and is now short 1,000 shares. He may raise his bid hoping to find a seller to "flatten" out his position. But before he realizes it a wave of buyers have come in and cleared out all the $.50 offers. Now the stock is $.50 bid .75 offered. Here comes that "Big" firm he just sold the 1,000 shares to at .50 with another bid for 1000 at .75. He makes this print. Now he is short 2,000 at an average of .625. The market keeps moving and now its .75 bid 1.00 offered. Now he has to make a decision.

Just like investors, MM Hate to take a loss. So 9 times out of 10 he will now sell 2000 at 1.00 making him short 4000 but with an average .81. At this time he would love to see a seller at .75 so he can cover his short and make a few bucks.

But instead the market keeps moving up. Now it is 1.00 to 1.25 and here comes the buyer again at 1.25. He doesn't want to lose the call so now he needs to sell 4,000 at 1.25 to keep his break even point above the bid. Now he is short 8,000. Market moves up to 1.25 bid 1.50 offer here comes the buyer now he feels he must sell 8000 here because "stocks don't go up forever".

Now he is short 16,000. And so on and so on. If the stock keeps moving up, before he realizes it he could be short 50k or 100k shares (depending how big his bank is). _________________________

Finally the market closes for the day and on paper he may look all right in that his "break even" price may be around the closing price. But now he has to figure out how to entice sellers so he can cover this short. It is important to note that if this happened to one MM it has probably happened to most all of them.

Some ways MM's entice sellers; Run the stock up with a "tight spread" in a fast market, then "open" up the spread to slow down the buying interest. After it has "cooled off" for a little while lower the offer below the last trade right after a small piece trades on the offer then tighten the spread so that the sellers feel they can take a "quick profit" by "hitting the bid" on the tight spread.

Once the selling starts the MM's will walk it down quickly by only making small prints on the way down with the tight spread. Another way is by running the stock up in the morning, averaging up their short then use the above technique to walk it down in the afternoon.

Hopefully after doing this for several days, it will demoralize the buyers. The volume will dry up and the sellers will materialize thinking that the game is over.

Contrary to popular opinion, MM usually Do Not Cover in Fast moving markets either Up or Down if they are short. They Short More. They usually try to cover after the frenzy is out of the market. There are many other techniques they use but the above are the most popular.

This technique works about 9 times out of 10 particularly in a BB market. However that is because 9 out of 10 BB stocks are BS. Remember what I said above. Most MM's don't have a clue as to the value of a Company until they get trapped. If the Company has solid fundementals and a bright future. Then the stock will do very well. And the activity that caused the situation will prove to even help the future stock activity because it created an audience."


http://www.internetplays.com/education/marketmaker.php

[bb72mo]

You always complain for Radix being traded on Pink Sheets..... How about some huge companies listed on Pink Sheets......Just something to talk about snakeyze..................



What do Rolls Royce, Nestle Chocolate and Heineken Beer have in common?

They all trade on the Electronic Pink Sheets (also known as "The National Quotation Bureau" (NQB)). The Pink Sheets have been around since the early 1900’s. (see a history of the Pink Sheets below) Many CEO’s are choosing to go public and trade over-the-counter on the “Pink Sheets” because it offers many of the advantages of NASDAQ without SEC reporting requirements and audited financials.

Due to the increasing popularity and interest in the Pink Sheets this Newsletter "will provide" you with information on the Pink Sheets, including its very long history and important contributions to Wall Street and U.S. Capital Markets.

The Pink Sheets are increasingly becoming an alternative to the OTC Bulletin Board and NASDAQ. Many experts are enthusiastically recommending the Pink Sheets today because it allows a company to have many of the same benefits of a private and a public company.

Recently, we have received many inquiries regarding trading on the Pink Sheets. This is because many companies that want to "Go Public" would like to have the benefits of having their securities publicly traded without having audited financials and filing periodically with the Securities and Exchange Commission.

The fact that companies can go public and not have to deal with audited financials and SEC reporting is attractive to many smaller companies wishing to take advantage of the benefits of being a public company.

Any company including a start up or development stage company can "Go Public" and trade on the Pink Sheets because it does not have any requirements pertaining to revenues, earnings, time in business or assets.(the OTC Bulleting Board also does not have asset or revenue requirements).

More and more companies have chosen to trade on the Pink Sheets because they either do not have the asset requirements to trade on NASDAQ or prefer not to have the reporting requirements.

We assist companies in becoming publicly traded on all exchanges.

[bb72mo]

PINK SHEETS


OTC PINK SHEETS

The Electronic Pink Sheets (NQB) are the primary trading leaders in the over the counter markets (OTC markets). They afford the increased transparency of the available information on the OTC markets, to render them more efficient for all. This like is where market makers post their bid and ask prices.

Their centralized information network benefits market makers, issuers, brokers and investors. Pink Sheets information enhances the efficiency of over-the-counter trading, providing better executions for OTC investors and improves the capital formation for issuers.

Brief History of the Pink Sheets

The Pink Sheets started in the year 1903, when the National Quotation Bureau (NQB) began as a paper-based, inter securities dealer quotation service. It was linking competing stock brokerage firms and market makers in OTC stock prices across the United States. Ever since then the Pink Sheets and have been a central resource for information on trading OTC stocks.

In the late 1990's the Pink Sheets were transformed even further, utilizing the power of electronic communication and the World Wide Web to increase the quality, timeliness and value of its information and services. The introduction of web-based technology has revolutionized many segments of the securities markets.

The Pink Sheets was more than a half century before Nasdaq which simply stands for the National Association of Securities Dealers Automated Quotations) Securities dealers are stock brokerage firms and market makers.

Nasdaq was started to give more exposure to OTC stocks. It became more popular then the Pink Sheets because it went electronic in the 1970’s while the Pink Sheets were still posting the buy and sell prices of the stock brokerage firms on pink paper and delivering them daily to all the stock brokerage firms.

In September of 1999, the Pink Sheets introduced their Electronic Quotation Service (EQB), an Internet-based, real-time quotation service for OTC equities and bonds.

Since then the Pink Sheets have become more and more popular. They have added 3 levels to become even more competitive with the OTCBB and the Nasdaq.

This is why so many well known companies trade on the Pink Sheets such as Nestle, Rolls Royce, Heineken and dozens of smaller banks.

[bb72mo]

There is no more difference regarding market makers playing or shorting stock who is listed on NASDAQ or Pink sheets......MMs can play it same ways and there is no advantage for them over one exchange against other......

[bb72mo]

More on pink sheets exchange...........

Additional History on the Pink Sheets / The National Quotation Bureau
Prior to the Pink Sheets in the early 1900’s, over the counter markets were completely fragmented. Up until 1999 the OTC stock prices (the buy and sell prices) were printed on pink colored sheets of paper and sent to stock brokerage firms and investment houses. That is why the investment community used the term Pink Sheets.

Before the Pink Sheets circa 1900 stock brokers and investment bankers would offer to buy and sell stocks by advertising in daily newspapers. They would also print out material about the stocks they were offerings to sell and the kinds they would be willing to buy. The investment banks then sent this information to clients and other investment banks.

The Pink Sheets were set up to take over this function of getting the buy and sell prices from all the investment banks. They would collect each day the prices that stockbrokers were willing to buy or sell stock for then would deliver them each morning to all the stock brokerage firms and investors. This served a similar function to what Nasdaq would one day do. Nasdaq is just the automated quotation of stock prices. The buy and sell prices of what stock brokerage firms are willing to buy or sell stock for. Nasdaq is a real-time dealer quote service.

The Pink Sheets continued to deliver pink colored sheets of paper until 1999 while Nasdaq and the OTCBB had been doing in for years. But in 1999 they became electronic and have been becoming more and more popular. They were out of favor prior to 1999 because you had to call a stock broker to get quotes but they have come roaring back to compete with the OTCBB and the Nasdaq. The Pink Sheets predates the Nasdaq and the OTCBB and have been around now for over a century.