Market Makers

[greencat]

ABLE NATEXIS BLEICHROEDER INC. Active
AUTO AUTOMATED TRADING DESK FINANCIAL SERVICES, LLC Active
BEST BEAR, STEARNS & CO. INC. Active
BMIC BILTMORE INTERNATIONAL CORPORATION Active
BOFA BANC OF AMERICA SECURITIES LLC Active
DOMS DOMESTIC SECURITIES, INC. Active
EDGX DIRECTEDGE ECN Active
ETRD E*TRADE CAPITAL MARKETS LLC Active
FRAN WM. V. FRANKEL & CO., INCORPORATED Active
GARC Garban Corporates Active
GNLN GUNNALLEN FINANCIAL, INC Active
HDSN HUDSON SECURITIES,INC. Active
HILL HILL THOMPSON MAGID & CO., INC. Active
JEFF JEFFERIES & COMPANY, INC. Active
LAMP LAMPOST CAPITAL, L.C. Active
MAXM MAXIM GROUP LLC Active
MERI MERRIMAN CURHAN FORD & CO. Active
MURF MURPHY & DURIEU Active
NITE KNIGHT EQUITY MARKETS, L.P. Active
PERT PERSHING LLC Active
RBCM RBC DAIN RAUSCHER INC. Active
SALI STERNE, AGEE & LEACH, INC. Active
SBSH CITIGROUP GLOBAL MARKETS INC. Active
SEAB SEABOARD SECURITIES, INC. Active
SSGI SETON SECURITIES GROUP, INC. Active
UBSS UBS Securities LLC (UBSS) Active
VERT THE VERTICAL GROUP Active
VFIN VFINANCE INVESTMENTS, INC Active
VNDM VANDHAM SECURITIES CORP. Active
WDCO WILSON-DAVIS & CO., INC. Active

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Types of Market Making

There are two types of Market Maker:

Independent Market Maker – when the Market Maker has links neither with the issuing corporation nor with its holders/major shareholders, being committed to making the market without ties with the company, holding group or shareholders.

Contracted Market Maker – when the Market Maker signs an agreement with the issuing corporation, holding group, affiliates or any shareholder to make the market for a given security. In this case, remuneration is freely agreed between parts.

This possibility is highly important in the Brazilian scenario, where the number of assets available is generally low. Therefore the issuing corporation is allowed to take part in this process to improve the liquidity of its securities in the market.

There are several ways of making an asset available to Market Makers. One of them is the Securities Lending Bank (BTC), service through which investors may make securities available for loan and interested parties may borrow them based on the presentation of warrants. The CBLC (Brazilian Clearing and Depository Corporation) acts as counterpart in the process and guarantees the operation.


Trading Rules

Offers of securities that count on Market Maker's support compete on equal terms with other market offers, i.e., trades are closed following criteria of best price and registration chronological order. BOVESPA may grant cost advantages in these transactions to push the market.

Market Maker must act based on ethical and trustworthiness principles. Therefore, in order to foster a fair and organized market, Market Maker's performance is submitted to some restrictions that could eventually trigger a deregistration process in case of infraction.

[greencat]

Key Level II Players:

TOP 5 MOST IMPORTANT (typically out of dilution) : NITE, ETRD, SCHB, TDCM & ARCA.

NITE & SCHB are wholesalers, TDCM a retailer, ETRD a retail ECN and ARCA an ECN.

NITE : This is the king MM of the OTC. He intimides traders and other MMs use that to their advantage knowing that he scares them. That's why NITE is the shaker on most stock runs; he is the most common ax. NITE could be on the ask all the time, he could be leading a dip scaring sellers to his buddies SCHB and TDCM on the bid.

TDCM : Retailer MM, you love him on the bid.

Biggest OTCBB ECNs : GNET, TRAC & DATA - you love them on bids also.

Other ECNs : ARCA, BRUT, BTRD, INCA, INTL, ISLD, REDI

Big Shorters : JIMK, POND, GNET or ARCA (anyone can use GNET, even other MMs because it's an ECN).

Wholesalers : ETRD, HRZG, MASH, NITE, SHWB

Top Retail Dilutors : ACAP, AGIS, BAMM, BMIC, CHIG, CLYP, FANC, FRAN, JIMK, MAYF, NATL, PERT, SACM, UCAP, VERT, VFIN

[greencat]

What Are Market Makers
The market makers are firms that buy and sell stocks of their own inventory. A commercial markup is added to the offered price. You can determine the amount using the on-line NASDAQ National Market Issues stock list or from the newspapers list. Equally, when a st

ock is sold, an amount known as markdown is subtracted from the base price.

In negotiating with the OTC an agency cannot charge commission nor perform as a market maker. The agency has to decide in between charging a commission and earn a markup or a markdown. Market makers or negotiators can buy or sell valuables of their own accounts.

AMEX and NASDAQ´s fusion in 1999 reduced some differences between floor negotiations and computerized market. Two of the benefits that came with fusion were the lowest prices and best negotiations.

During many years spreads (difference between supply and demand) where much larger for NASDAQ stocks than those negotiated on floor markets. In 1997 NASDAQ was fined for making much too large spreads in stocks negotiations.

NASDAQ has made some changes in order to reach larger volumes of negotiations. It launched a super-montage negotiation system in October 14th 2002 to stand up against negotiations losses at ECN.

In 2002, the ECN took away 49% of negotiations in stocks listed under the NASDAQ system. The super-montage system allows stock agents issue many shares to buy and sell instead of one. It additionally shows the availability of stocks in five different market price levels instead of the usual market price data about the stocks bought and sold. It is not important which system is better because as long as there is competition between NASDAQ and ECN better prices will the investors find.

Some structural flaws in NASDAQ´s negotiation system made ECNs grow. There was no compensation stock exchange for OTC negotiations; therefore, buying or selling stocks wasn’t always available for interested groups.

This lack of centralism made it possible to charge large spreads, what boomeranged as a $1 billion fine against NASDAQ in 1997. In that year the SEC authorized ECNs the use of the electronic board for NASDAQ´s negotiations, so that joined to the latter’s orders, those from the former could also be shown in level 2 quoting system.

Level 2 quoting system are market prices supplies and demands provided by the stock market-makers that are within NASDAQs system The ECNs provide the individual and group investor with an alternative negotiation system. ECNs compare negotiations -buying and selling orders- electronically having increased their volume of negotiations by lowering spreads. Negotiating with ECNs is advantageous for large company investors, who wish to negotiate big blocks of stocks. If large company investors used the marke

t-makers or NASDAQ markets, common investors in general would be able to see their negotiations and market prices would change. ECNs allow group investors negotiate in anonymity.

ECNs also allow individual investors negotiate before opening and after closing hours. The diversity of NASDAQ negotiations going to ECNs reduce NASDAQs rent when not able to re-sell their quotas and negotiation data to agents and investors.

Competence between NASDAQ and ECNs can only make market prices better to investors. NYSEs plan to buy ECN Archipelago in April 2005 could change the basic ways stock markets operate. This combination would allow NYSE widen its position to what options and future markets respect, as well as being able to compete in the automated trade market for NASDAQs and ETFs stock lists.

Following this announcement and to improve even more its competitive position and encourage its offers, NASDAQ also announced that it would buy Instinet and ECNs. This combination would allow investors negotiate stocks from NYSE through NASDAQs system in an easy way. Foreign stocks are listed and negotiated in its respective markets. Financial newspapers and the on-line financial websites as Yahoo give market prices information about foreign companies that are the most negotiated in Europe, Asia, Australia, South Africa and Canada.

[daiello]

Greencat, i have taken a liking to NITE controling the stocks i am in due to his simplistic "strategies". It seems he will be on bid with size of 10k, and ask of 5k, then when the run is slowing down, he is 10k ask and 5k on the bid. Drops it back, selling stops, NITE wants 10k on bid again. This has happened multiple times, but im sure it doesnt always work out like this.

Even though he can be scary on the ask, i have to say, with him on the bid, i feel safer.

[CatFish]

otc stocks they can put any size bid or ask they want. dosnt mean they will have them or buy them. look at any big board stock and the numbers they show are real.

[daiello]

So i should say, when NITE shows 10k on the bid, i like it :D

[Cindy]

I have not so much research on market making.