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A Day In The Life Of A Market Maker

Back when I was a market maker for a very well known firm predominately on the short side, there was almost never a dull moment. At 8am, everyday I walked into the office ready to battle. Only this battle was an intense war with millions of dollars used as ammunition.

Well before the existence of ECN's (electronic communication network) and program trading, recognizing your so-called opponent was a relatively easy task. You knew the who the market makers were that were long, and short. We made our living, and did very well shorting all the stocks of the so-called chop shop brokerage firms (stocks that were pure junk and being pumped to their clients). Chop shops would prop up the prices of these companies and sell them to their clients just to make big commissions. They knew full well that these companies were worthless garbage, yet it was all about making money. Most of the firms that were involved in these stocks were either on Long Island, NY or Boca Raton, FL. They were rumored to have people in the firms that were not your typical Wall Street guys if you get my drift, "connected." Whenever a firm brought one of these stocks to the public we would always go into to the stock and trade them. Usually the first day that the stock traded we would sit on the sidelines and let these firms bring the stock higher. The second day is when the fun would begin for us.

I remember taking positions in a few of theses stocks, as soon as the firms saw our market maker symbol on the Level 2 all hell would break loose. Our phones would light up like Christmas trees from firms all over the world asking us what we knew or what we were going to do. My personal office line found its way into some highly concerned individuals hands, mainly those working at these chop shops who would call and literally beg me not to go into there stock. They knew once we initiated a position in the stock it would almost always fall. Thus, halting their ability to sell more shares to the unknowing public, and eliminating their big commissions. Back then the commissions that firms charged customers were not regulated, and the chop shops took full advantage of this charging client's huge fees. Although our main goal as a firm was to make money, and we did just that. We also looked at it as if we were doing the general public a service by bringing attention to these firms that were duping the public by selling them stock in worthless companies. As you would understand, the so-called chop shops did not take kindly to us revealing their tactics and profiting from their flaws in the open market. They considered us a threat to their ability to rip off their clients and make a ton of money. I had personal relationships with many of the brokers at these firms; I witnessed countless months in which they earned over $200,000 in commissions from the stocks we would eventually trade. With that kind of money on the line its understandable certain individuals would take matters into their own hands. I received threatening phone calls on a regular basis telling me not to trade the stocks they were involved in. On a couple of occasions we had a few very large visitors come to our trading room and try to convince us why it would be in our best interest to not trade their stocks.

Threats aside, we were operating legally in the fair market, we simply located and traded those who were not. Over the years the SEC closed down most of these so-called chop shops and many of the owners went to jail. The brokers that were making $200,000 a month are now broke and looking for the next scam to come around. Until next time I will leave you with a little tip, if a broker calls you and tells you he has the next great stock for you, please hang up.

Lou Cardinali,
The Leader In Market Technical Guidance