RE: Late trades16 May 2020 09:34
Hi dryland.
As an ex MM, I know we can’t trust the ‘buy/sell’ status of the trade reporting system.
The system has no definitive knowledge of whether a MM bought or sold any specific trade so has to assume which it is by assessing the quoted pricing.
However MM can and do trade inside the quoted price. If they have a specific order to fill or position to reverse or enhance, they may trade very close or even up to the other side of the quote. The extreme of this is if one MM ‘hits’ the other MM. they will buy or sell stock from/to the other MM at that other MMs quoted price/size. Eg. If The first MM is buying, and the quoted price is 110-114, in, say 25000, they will pay 114 for 25,000. In other words, they are bidding 114 and their real price is 114-118. As they register the trade, it will go through as 25,000 at 114, with their price being 114-118. It will register as a market ‘sell’ by these reporting systems (one that will have downwards influence on the price) when the reality is the MM has massively pushed the price up by taking out another MM. and a lesser extreme example is where a MM will quote 110-114 with every other MM but will actually pay 112.5 in size. Those trades will register as buys when they are sells. Happens all the time.
Also occurs often when one MM is seen as the ‘go-to’ MM for size and is referred to as “the market” by brokers. That MM seen as “the market” often trades way inside their own quote, particularly if they don’t want the other ‘lesser’ MMs to know what they are up to.
Cheers
Intrepid.