3 ms·
Except this is not really what market makers do. The amount of liquidity they can provide by buying high and selling low is quite limited, not to mention it loc
by jimmydorry 5y ago
Except this is not really what market makers do. The amount of liquidity they can provide by buying high and selling low is quite limited, not to mention it locks up a lot of capital in market price speculation with the significant risk of 'getting it wrong'.
Without going into motivation behind why ($$$), they will sell any share in demand at the prevailing market rate. As long as they later buy the same number of shares that they sold into the market, everything continues to work. By internalizing and batching orders, they can also exhert force on the price to ensure they don't lose on these 'market making shorts'.
For your example to be equiavlent, scalpers would need to sell parts that they don't have, which falls apart as an analogy as such games would fall apart quite quickly during a supply crunch.