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Georgia Bard

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Alias Born 08/30/2000

Georgia Bard

Re: None

Friday, 11/03/2000 5:33:35 PM

Friday, November 03, 2000 5:33:35 PM

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Market Maker Manipulation or Market Influences Part 3

Now that I hope I have established that MMM is not always the MMs and that it is the Market Maker (Clearing House) Blue Sheets that is the focus. We all know to make an orderly market, the MMs have a vast resource of tactics and tools. It would probably take more than my lifetime to figure them all out.

However, one misconception is about Level III, which even I have stated is what the advantage is to the market makers. But level III is not much different that level II except Level III is the interactive tool that market makers use to change their quote with the click of a mouse. The screen is different and the more I learn the more I find out the misconceptions of the market on the internet. Previously, I stated that Level II was the source of the MMs seeing what is going on in the market and that is not the case. In verification, I found the following article.
http://www.streetsideinvestor.com/articles/965407406.php3?tott

How the Market Maker sees what is going on in the market is through the Firm’s "Book" System. That is an entirely separate system. It is refered to as the "Book" because it tracks the firm’s order flow, which is merely an electronic process system that shows up on a monitor. It is not all inclusive of all market makers but only the firm itself. At this time, there is no central order book for the Nasdaq. Another words the overflow is not on all the market makers but merely the overflow within the firm. In some cases MMs refer to it as a “Brass System” or an “Eagle System”, which tracks the firm’s order flow. This system monitor shows all the buys and sells coming in from the market to the brokerage firm at any given second. If the "Book" showed the entire market as a whole then there would probably be no need for brokers to sit at the monitors making the market. It would work as the NYSE does, which do not use market makers.

In November 1992, the BRASS system was introduced. This BRASS system eliminates the handling of trade tickets by utilizing total computer throughput. Productivity through accuracy and responsiveness has been greatly enhanced. Where according to MHMY’s Filings the following was stated, “Utilizing the latest electronic trading and information technology. We have increased our trading and access to markets and information to meet the new trading rules. We have, among other thing, linked a number of automated trading systems to our arsenal, such as Selectnet, Redi, Instinet and other electronic communications networks, and the automated ticketless Brass trading program. The Brass system, which, in effect, makes trading "paperless", enhances the ability of our traders to focus on market conditions by eliminating the prior administrative burden incumbent in trading. The Selectnet, Redi and Instinet networks link us with trading partners throughout the United States, including other brokerage firms, block trading desks and specialists on the regional exchanges. These systems provide us with access into every major securities exchange on a worldwide basis. We also employ the Autex electronic volume monitoring system, which permits us to determine our overall volume of trading as well as our relative trading volume in a specific security. During Calendar 1998, Autex reported that we ranked 24th in total market making volume in NASDAQ and bulletin board securities.

Market makers are not supposed to communicate with each other either. What I have referred to as "Stock Calls" are merely Auto Executes from a particular MM firm’s electronic "Book" System. Another words, if I make an order for 2500 shares to say MHMY or NITE, they have a 500 fill that goes off instantly once it hits their "Book". HRZG, I have been told has 100 shares that goes off which is part of their order flow agreement with My Track I assume. Can this be a code for what the market is doing? Are there other systems to stay in touch with the market other than the brokerage firm's "Book" (orderfow) system?


Yep, as stated in MHMY’s SEC filing, ” . The Selectnet, Redi and Instinet networks link us with trading partners throughout the United States, including other brokerage firms, block trading desks and specialists on the regional exchanges. I believe as with anything where it deals with money, there is always a chance of manipulation through a code or some type of communication. Another words, if I were a market maker and I see a 100 share go off on the "bid" or the "ask" and a stall, I would know that someone has an order to fill.

As a professional curiosity I could merely check my "Book" to execute a client's order to provide stock into the market as per the demand. This is merely making an orderly market.

But I also believe because of the consistent events that follow these 100, 200, 300, 400, 500 etc. share trades that it could be used as a stock call or communication even though it is not that as per say but merely the auto executes.

This is the way I understand it and I hope this helps clear up some of the misconceptions of the Market Makers. As with in Part 2 of this composition, the charges that have been made on MMs by the SEC proves there is always a way to manipulate. But again the bottom line is who is doing it, MMs or an outside force of the market..

Please note: MHMY had the BEST explainations in their filings and they were a victim of bashers and shorters. I am using their information that is available and NOT making any hint that MHMY does anything at all. Heck they been hit like so many other stocks.

So how do investors somehow manage to overcome the obvious deception and manipulation in OTCBB arena? One answer is a direction approach trading style by going long, which the MMs or market forces do not expect. In the war between investors and public companies on the OTC BB vs the MMs and other forces in the market. People should understand the MMs have all the advantages due to position or other information factors along with direct confrontation such as momentum and better information tools for the market.

However, an indirect approach tends to weaken the path of least resistance before slowly overcoming it. The most effective way is long-term investors slowly accumulating and holding thus drawing the MMs out of its defenses making them as naked as their short position. This is war so this slow accumulation and holding for the long term easily achieves the desired effect to force MMs to rethink and knock off the tactics or bury themselves deeper.

The MMs when caught will especially use every trick and tactic in the book to get a Bear Raid thus playing on the individual fear of most people. The MMs feel they have information and position advantages, which they definitely do over the investors as long as the holding of the stock is in weak hands or short term holders.

In regard to the OTC market, OTC:BB, some MMs believe all OTC:BB companies are not worth investing and management is ineffective regardless what is happening within the company. Furthermore, MMs know they are in the position to impose a great deal of influence in OTC:BB stocks trading when it suits their needs.

This inherent power of position enables the MMs to move the markets at any time up or down. This power along with other market maker tactics are confirmed in the WSJ article that was done on NITE the Market Maker in March 2000, http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=13045651, where it states, "Most online investors know little about Knight, but Knight knows a lot about them. ~ Most of its nearly 400 traders are paid solely on the basis of profits they earn for the firm. ~ But when you have 30% of the order flow, you can make some damn good guesses ~ Computers automatically fill the vast majority of orders Knight is charged with executing, leaving most of its 393 traders free to try to take advantage of the information these orders reveal about the market. Or what the information is on the internet in the chat rooms is more believable to me personally. Also as more confirmation to the 12 Red Flags of Manipulation I refer to this section In normal markets, the highest bid (to buy) is just below the lowest offer (to sell). Yet it's not uncommon, traders say, for Knight to bid more for a stock than the lowest offer to sell it, and to offer to sell a stock for less than the highest bid to buy it -- an anomalous situation known as "locking" or "crossing" a market. This anomaly leaves the best-priced order unfilled. But it forces the market in the direction the firm wants it go. Nasdaq restricts crossing during the day but permits it before the opening.

"It's not unusual to see the large wholesale firms leading the pack on some of these locked and crossed markets on most openings, and clearly Knight is the name that's pre-eminent," says Patrick Ryan, president of Ryan, Lee & Co., a small brokerage firm in Washington, D.C. Still, he says the problem results more from the behavior of Knight's end-customers than from Knight itself. If Knight is "sitting there with unsolicited orders from a group of gamblers -- who figure 'P.T. Barnum was right, if I pay $90, someone will pay $92' -- clearly it's buyer beware."
http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=13045651

As a result, the only way, I can see, to draw them out of their favorable position is going long in your investing portfolio. It is best to use solid common sense and have a plan to enter the market (including dollar cost averaging) and an exit strategy.

Now this does not mean just any company but to effectively increase portfolios gains, long-term investors must find a great fundamentally sound company on the floor and accumulate long AFTER doing as much DD as possible and before the MM tactics and games begin.

Hey, this is my opinion and I could be wrong.

Gary Swancey


:=) Gary Swancey

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