https://external-preview.redd.it/MdW66l27SBk9X8GL1VndVJNqy8C0x9W3LtrFRl102Zw.jpg?auto=webp&s=b99d57fe860f67b2da7ca256011125d779628921
Quote: “We’re able to buy a share without driving up the stock 10% every time?”
[::Video of Quote::](https://www.youtube.com/watch?v=VnEBw3yofVE)
[::Context of Quote](https://www.youtube.com/watch?v=ws7w-pioWS0&t=153s)
Can someone explain what he is talking about to me at a 3rd grader’s comprehension level?
https://preview.redd.it/1t1io2h81sw91.jpg?width=880&format=pjpg&auto=webp&s=d612034056d239d6d020ed33e19eaff5bcfdaf91
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You’re not supposed to look behind the curtain.
The explanation is already there you just have to understand it.
Market makers are brokerages so big that they can internally match buy and sell orders from their own client traffic. Market makers do not need to go outside to an exchange (like NASDAQ) to find a buyer for their seller, or seller for their buyer. The system is kept honest by using the last quoted price from a major exchange (again like NASDAQ).
They decide where they quote
It’s illegal for a market maker to fill an order internally without first attempting to fill in the open market. There are lots of rules and regulations for ensuring a customer’s order follows ‘best execution’ rules. Market makers are also institutions that are allowed to trade in the Dark Pools, which explains not affecting price. So while acting as a market maker, they are not only trading stock for and out of their own inventory but executing transactions for others as well.
Even though WeBull is your broker, they still must route your order to the open market. If they are offering the security at a better price, they are allowed to fill your order however.
Market Makers are important for providing liquidity to the overall market, as without the DMMs and other MMs it would be a lot harder to get your order filled. Market Makers also makes the ‘spread’ of the security (keep in mind we BUY at the ask, and SELL at the Bid while the Market Maker BUYS at the Bid and SELLS at the ask so they also receive an immediate gain in that sense).
As a client with any brokerage, you have the right to ask your brokerage what exchange your order executed on and even who you traded with. They must maintain these records for at least 1 year (the rule I believe is three years do not quote me on this part though)
Fuck middlemen
You don’t need to know how it works just buy and sell your options and shut up.
This paper should be somewhat helpful: https://finance.wharton.upenn.edu/~wangchj/papers/OTC_EX.pdf
>He is talking about how they are able to buy a share without driving up the stock 10% every time.
Here is the article I got the thumb picture from https://www.fool.com/investing/how-to-invest/stocks/market-maker/
Basically, your broker puts in your order for 100 shares of Gme.
Then, instead of going into an illiquid market, the MM just shorts 100 shares and delivers them to the broker so they are now in your account.
Since the MM doesn’t actually go to the market, large orders won’t move the price.
In theory, this is very good for retail.
MMs make a profit bc they quickly look for shares and cover the 100 shares short for Gme. They take the spread between what you buy the shares at and what they can eventually find them on the market for.
Bc this process is very good for end users, the SEC has given all kinds of special exceptions to MMs who help the system function.
The problem comes in when the MMs cannot actually find real shares in the market….and they are already short in order to deliver shares to the broker.
This has lead to a crazy tap dance where various institutions try to get out of their Gme holdings but cannot.
A lot of the burden is in MMs since they do not have to cover the way that other players do…however, it is a heavy bag that they are holding that eats into their profits.
Eventually, MMs will close and Gme will moon so hard.