2 ms·
If you're a large institution, and you want to sell an enormous amount of shares in some stock, the price of that stock should plummet if there aren't buyers av
by DougWebb 13y ago
If you're a large institution, and you want to sell an enormous amount of shares in some stock, the price of that stock should plummet if there aren't buyers available at the price you want to sell. Having a market maker buy those shares is hiding the fact that a huge position in the stock was just dumped and no one wanted to buy. Sucks for the company, but if you're not attractive to buyers or to the seller, then your market valuation was already wrong.
This would also curb the behavior of the large institution. They shouldn't be able to dump all of their holdings of a stock like that at a high price if there aren't real buyers at that price. The institution should be forced to chase the price down to pick up enough buyers for the whole position. If they still can't move it all, then they're holding a worthless stock. Sucks for them, but investing is a gamble and sometimes you lose your investment. You should've invested in a more valuable company.
The theme I'm getting at is that I think that market makers definitely alter the dynamics of the market, as they claim to, but contrary to their claims they do it in a way that benefits themselves and other financial institutions to the detriment of non-financial-industry investors and the companies and other real-value instruments (bond originators, mortgage borrowers, etc) being traded.
- maxerickson 13y agoWhat is not real about the automated system? As far as I know, they pay real dollars. Is it the fact that the bet on the shares is short term? There are some issues with HFT that I don't like, where different players are getting different access to information. Beyond that, I have trouble with the argument that parties that aren't me should have to engage in transactions that I like the shape of (or the other way around, should be prevented from engaging in transactions that I don't like. I'm using transaction here in the sense that both parties are acting freely...).