If a market maker can never hold or make money on a transaction...
I wouldn't say they "never" make money on transactions. I'm sure there are occassions when they do a little trading for themselves when the opportunity presents itself.
Questions to the above.
The quotes/trading by market makers are done by computers in the OTC,correct? Software or a human being places the quotes on the level II? A human never see's or controls the majority of the trades?
"The MM can short anything w/o any caps, limits, or major cash reserves.This leads to manipulation of price action by the MM's on the trading floor in most penny plays." -this was advice I read reguarding MM shorting, but if MM's do not hold shares it would be invalid. Am I correct brad? TIA!
"Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order." Thanks brad, but investipedia answered my question. Market makers must keep an inventory in order to keep a market liquid. Also, a great read from a former otc market maker reveals as much or more manipulation is implemented by market makers as P&D operators.
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