The mechanics of price change. Who decides ? Who governs it ?

[Crap Buddist]

If you had market makers working in unison and "Mental Demand" outstripped supply what would it take to keep lowering the price? Just the desire to do so ?What legally must happen to record a legitimate exchange price change ?

Anyone have any further insight ?

Cheers.

 

[Rhody Trader]

Clarification of "mental demand outstripping supply" would be a good starting point for this discussion. I'm not entirely sure what you're driving at there.

If the question you're asking is whether market makers could act together to manipulate prices contrary to the direction they "should" be going, then I would say no. Market makers are not price fixers, and neither are the exchanges. They simply facilitate, especially considering that in an exchange environment trades need not even go through the market makers and the exchanges themselves don't do anything but report prices. Brokers could operate directly with each other to do customer transactions. As such, market makers don't have unlimited power to set prices. Further, market makers and exchanges will only make money when transactions get made. It works contrary to their interests to have prices at levels where participants aren't motivated to trade.

 

[Crap Buddist]

Cheers Rhody, and that is a part of what popped into my head "direction they should be going". There seems frequently a "Con" move in the market and it cant all be volume driven by actual demand as price can move significantly on say reduced size/transactional volume etc.

That manipulation of getting other participants positioned in false break outs at highs n lows.Who is facillitating that frequent event for example. Are they "they?" pushing prices to resting orders ,again to generate trade for the market makers,brokers and the exchanges.

I cant fully get my head around it. And maybe the market, whoever they are, do not even think like that. But I would. But yes essentially I'm thinking manipulation of prices to encourage people to trade.

The price will generate demand/supply, rather than demand and supply generating price. Ones a bent game the other ones fair. Thats what pops up. Maybe it is looking at the same side from a different angle but one way seems legitimate ,the other a bit dodgy

 

[Rhody Trader]

Of course the answer is that it works both ways. Movement of price by the market makers will make trading more or less attractive to participants, but only so far as those participants are already biased toward action - presumably in large part on the basis of supply and demand (though, obviously not exclusively).