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if the market maker has a sell order, it can offer stock "short" knowing it can buy the stock back from the seller, also risklessly. It's a "no-brainer" and almost always profitable. These market makers have no desire to position stocks (keep an inventory) and are only a factor in a particular stock when they have an order. Their influence is temporary, and they very seldom quote the inside market. The fact is that most market makers are not very interested in taking risk. |
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Naturally, almost any market maker can be a significant player in any particular stock at any specific time; however, the powerful market makers named above seem to exert influence on an ongoing basis. Knowing where they are at all times is a good policy to follow. |
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Certain market makers, though few in number, are the movers and shakers in the Nasdaq market. These firms usually handle many institutional orders and commit significant capital to the positioning of various stocks. There are many times called the "Ax" in the stock. If not the Ax, they are at least "real" market makers. With today's enhanced transparency and the proliferation of ECNs, market makers, including the Ax, are very capable of disguising their orders. For example, the Ax in a stock may very well show itself to be offering shares at the inside offer when in fact it is bidding for shares through another market maker (stooge) or anonymously utilizing the services of one of the several ECNs. |
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Therefore, you must always keep in the back of your mind that the picture you see may not really reflect the intention of the Ax. These people are not stupid and certainly do not wish to draw you a road map of where they intend to go. The Ax is a firm that has a particularly large interest in a specific stock. Sometimes, that interest may have been as an underwriter or selling group participant in the shares, research coverage, ownership interest, or a big retail position in the stock. Sometimes, there is more than one Ax in a stock. |
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If one observes a stock for a period of time or reviews the company's filings on the SEC's EDGAR database (incidentally |
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