mrfence, you seem to have lots of experience with the details of trading. I would like to explore some of those details. details that may be useful to others. Bear with me the following details and then to the questions.
Price Changes, Directions and Trends
In March, April and May 2013 and before the rise to a high of 5.44, a +.10 increase in price would have been considered "massive." Such an increase would be considered "impressive" and would require at least 1.5 to 2x the volume seen today to acheive a closing price that was +.10 up and over the previosu day's close. FNMAers have become spoiled by May's leg up.
Indeed May end was spectacular. In May, MMs traded 1,874,710,097 shares. For the month of June, MMs traded 898 million less shares than in June at 976,663,576 shares traded. Leading the MMs making 88% of the trades in June were these MMs and ECN.
JUNE 2013 - 20 TRADING DAYS - MARKET MAKERS MONTHLY SHARE VOLUME ATDF - AUTOMATED TRADING DESK FINANCE - 330,521,369 ETRF - G1 Execution Services, LLC. - 160,924,219 (This is ETrade Financial Corp.'s Chicago market-making unit - handles Etrade and some of Scottrade's retail order flow) NITE - Knight Capital Americas LLC - 144,242,400 CDEL - Citadel Securities LLC - 119,857,621 CSTI - CANACCORD GENUITY INC. - 45,858,693 (institutional program trading services) ARCA - Archipelago Trading Services - 35,425,132 (ECN) PERT- Pershing LLC - 29,727,414 - CANT - Cantor, Fitzgerald & Co. - 17,514,495 MERQ - MERCATOR ASSOCIATES, LLC - 15,046,523 UBSS - UBS Securities LLC - 13,542,491 TOTAL - 912,660,357
1. When making a retail order through an online broker, most online brokers route the orders to the the MMs because the MMs pay them to do that - payment for order flow - though they may buy or sell a stock to their retail clients at currently quoted prices from their own inventory of equities. ~~~~~~~~~~~~~~~ See Scottrade's order routing venues (click "Display") and at the bottom click the link to see who pays them for order flow - http://www.marketsystems.com/msi/reports/index.html?clientid=SSIC
~~~~~~~~~~~~~~~ 2. Retail, institutional and broker/dealer traders with DAT and DMA brokers route to MMs and through ECNs and exchanges directly to the order book and matching engines.
Prices are usually set in two ways: 1. by MMs making quotes and order sizes of their own inventory since they make market as well as handle broker/dealer, institutional, wholesale and retail DAT orders and order flows.
2. by Retail and institutional orders made with price and size made by DAT/ DMA traders routing directly to ECNs and exchanges.
All of the orders are time stamped prioritized and are aggregated to form the exchange's order book and the matching engine does its work to match price and size and to execute partial or full orders against and from what is available.
Does this match your understanding mrfence? Anything to add or alter?
If this is so, the MMs have the lead in setting prices since they have full view of the order book and its depth and can alter prices up or down by simply buying or selling 100 shares or more at whatever price they wish to gain and more importantly maintain. Of course with thousands of orders, cancellations, resizes, repricings one person cannot do that so there are algorithms that do that, algos that up the price or lower the price over a set duration of time or volume like the VWAP, TWAP, etc.
Now if this is so, what does news have to do with price changes, increases, decreases, trends, etc?
How does one know there will be a gap up or down or that prices will increase if a bit of news appears?
For example, for the record I timed Watts answering questions to price changes. Is there any real correlation between what he is saying and the price?
What do you think mrfence? Are the MMs listening to the hearing and then adjusting prices? How about DAT and DMA traders or retailers trading through online brokers? Are they doing that?
What do you think happens at the level of people and input devices making orders - keyboards, mice, touch screens, etc?
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