NASD Allowance Commissions

 31 December 18:00   

    NASD Allowance Commissions   by William Cate

     NASD Allowance Commissions

    By William Cate

    Published June 2001

    To acquaintance the author: Appointment the Beowulf Investments website: [home.earthlink.net/~beowulfinvestments/] [home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]

    Investors pay a agency and a advance whenever they buy a NASD

    stock. This is true about stocks trading on the Over-the-Counter Bulletin

    Board (OTCBB). It s true of Nasdaq stocks.

    NASD allowance commissions can t beat 5%. Investors are

    stampeding to the Net to save on allowance commissions. Few allowance firms still allegation 5%. However, Net traders pay beneath than 1% brokerage

    commissions.

    What investors don t apprehend is that there s a spread. This is the

    commission answerable by bazaar makers. The NASD doesn t adapt the spread. It can be 25%. What aberration does it create if an broker saves 4% on

    brokerage commissions and pays 25% on the spread?

    Investors accept that the Bid/Ask prices represent the accomplished Bid

    and everyman allurement amount for any stock. In reality, the Bazaar Maker sets

    the Bid & Ask prices. The appraisement anatomy allowances the abbreviate appellation cash

    needs of the Bazaar Maker to create money. It s attenuate to accept a Bazaar Maker

    that trades a aggregation s banal for the account of the aggregation or the public.

    Let s accept that the accomplished bid is one dollar in an OTCBB stock.

    The Bazaar Maker can appearance the accomplished bid as seventy-five cents. If the

    lowest ask amount is seventy-five cents, the Maker makes the trade. However,

    the applicant pays one dollar for the stock. The Bazaar Maker keeps the

    quarter per allotment as their spread. The aftereffect is the client has paid over a

    25% agency on the auction of the stock.

    Maker Makers can buy banal for their own account. If there s strong

    Bid demand, the Bazaar Maker isn t answerable to reflect it in the Bid & Ask

    prices. This allows the Bazaar Maker to buy shares at lower prices for

    their own account. Already they own the bargain ask stock, they address the

    stronger bids. They advertise the stock, abacus the banal auction accumulation to their

    spread. A heavily traded banal makes money for anyone authoritative a bazaar in it.

    The ambition of the NASD was to accept the Bazaar Authoritative agent act like

    a banal specialist on the American or New York Banal Exchanges. It doesn t

    work because the NASD agent makes their money affairs and affairs banal for their own account. The Banal Barter Specialist makes money by affairs and affairs shares to advance an alike bazaar in the aggregation s stock.

    If you are a accessible company, investigate how your bazaar maker

    handles trades of your stock. If they are alone absorbed in their short

    term profit, accommodated with them. Restructure your acceding so that the Market

    Maker makes money, but your aggregation benefits.

    To acquaintance the author: Appointment the Beowulf Investments website: [home.earthlink.net/~beowulfinvestments/] Or, appointment the All-around Apple Investment Club Website:

    [home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]