You make absolutely no sense.
Why would a specialist on the NYSE set an initial price for TLB of $2.20 when he knows that it was trading at $1.80 in the pre-session.
You say that he did this to cause margin selling. Most likely all the information pointed to a $1.80 opening price.
I never said it was wrong, if you look over
my posts. What I said was that it was an
artificial construct of the Specialist.
People often fall into the trap of thinking
the market share price are accurate or reliable
pricings of these securities. They are not.
If the market was really so good at accurately
representing the value of these securities,
there wouldn't be 52 week highs and lows with
such tremendous disparity in value, and there
wouldn't be bifarcated valuations among different sectors, so heavily that an outside observer would think the companies operate in economies totally alien to each other.
The only bottom lines is that companies list
themselves on the market to enrich insiders, pay for their lifestyles, and raise funds.
They often exit the market to restore against
damage done by the market and all its regulations and everyday risks which private companies do not have to endure.
Specialists are there pre-market.
It's the media and exchange which tout the
perception that the Specialist doesn't get
a handle on things until official open, but
no, he's there pre-market also. He's just
not there post-market unless there is a relevant
event. Not the same person, but someone else
from the DMM firm.
I think the specialist looked at the before hours trading and figured out a price. You say there was no bid. I find this hard to believe if there was before hours trading.
By your theory, the entire market was waiting for the specialist to set the initial bid. At no time before this event, the market provide no guidance where the price ought to be. At no time before this event were there any TLB traded in non-NYSE markets. Moreover, the specialist did not know such data is readily seen on level 2. I find this hard to believe.
"Are you saying that the end of the day price would have been higher if the $2.20 was set first?"
Without Question. First of all, there would
have been no forced margin selling. There would
have been the chance to hold $2. But the Specialist is not in the business of coddling
shareholders psychoses. He's in the business
of paying less for more stock, then restoring
order at a higher price. Or, a lower price if
the news really is horrid. Trades don't even become REAL until the 3rd day after they are executed. It's a giant slush fund of which he controls the action to a higher degree than anyone else, unless a big player steps in to change things.. Still, on the NYSE that player would go through the Specialist. They are the guys on the floor, sometimes they take physical paper note trades or even verbal trades. They operate in booths with multiple screens, they typically are responsible for up to 20 "issues" aka "stocks" depending upon the sizes. For example BAC Specialist would ONLY be on BAC, all day every day. They can rotate the schedule but there is only one stock for that person.
They don't only make $ on trading, though, they make $ on transaction per % of dollar volume, so it's in their interest to create volatility
for many reasons. Then they seek balance.
"In declining markets, it’s the public who is doing the selling (and shorting) and the specialists who must buy to maintain an orderly market - even if they are not bullish at all."
On that fateful day, the specialist opened at $1.80 and not $2.20. Trading ending up about $1.55. Are you saying that the end of the day price would have been higher if the $2.20 was set first?
Was there no guidance from before hours trading. How about level 2 bids and asks.