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Friday, November 21 2008 10:58 AM
  • While ETFs are should trade at prices that closely match the value of their holdings, some thinly traded ETFs are having a hard time making that happen.
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  •  
    Nov 21 12:18 PM
    It isn't clear why there are even market makers with today's technology. Why aren't exchanges pure electronic, with auctions setting price? Just like Ebay, I put my stocks out there for the period of time I want (say 1 minute, or 5 minutes) at the price I want. They sell or they don't. If they don't I relist. And I can do it any time of the day or night, 24 x 7. Transaction costs very low. The same applies to buying. I bid what I'm willing to pay for a period of time, and someone either sells it to me or not.

    Market makers seem redundant. Like full service gas stations. Sure I charge you 10 cents a gallon more, but I clean your windshield and check your oil. The auction system can still allow those who want the convenience to have it. Just like Ebay has "buy-it-now"... the pseudo market makers could offer that.

    For people who want to buy and sell large blocks of shares, they hire a broker to find them, and pay that broker directly for the service, or do them in small lots as auctions.

    Maybe companies with more than 1 billion market cap should run the secondary market in their own shares.

    The current model is way out of date with the times.
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