Market Maker – Home Edition

March 6, 2009 by  
Filed under Commentary, ETFs, Humor, Scams & Ripoffs

Do you ever dream about being a market maker?  You know, one of those “savvy” traders making a few pennies from other people’s trades and keeping the markets liquid.

I bet you thought only the big dogs could do that.  Not anymore.  Now it’s possible for everyone to be a market maker from the comfort of your own home.

It’s simple, here is your 3-step process to untold wealth:

  1. Place an order to Buy 100 shares UBD, limit $26.00
  2. Place an order to Sell 100 shares UBD, limit $53.00
  3. Rinse and repeat

With those two orders, you will now “own” both side sides of the bid/ask spread for Claymore U.S. Capital Markets Bond ETF (UBD).  Congratulations, you are now the market maker, and you stand to make more than 100% on every trade.

But wait!  Why stop there?  Why not expand your new empire?  Using the same process described above, you can become the market maker for these securities too:

  • Buy 100 shares UEM, limit $21.00; Sell 100 shares UEM, limit $38.00
  • Buy 100 shares GBB, limit $37.50; Sell 100 shares GBB, limit $45.00
  • Buy 100 shares AYT, limit $.20; Sell 100 shares AYT, limit $41.00

You are now the market maker for Claymore U.S.-1-The Capital Markets (UEM), iPath GBP/USD Exchange Rate ETN (GBB), and Barclays GEMS Asia 8 ETN (AYT).  That last one is a real doozy – you stand to make 20,400% on every trade.  That’s better than owning a goose that lays golden eggs.

By now I’m sure you are wondering how this can be possible.  It’s simple – these four securities have been abandoned by their sponsors.  There are no sponsored market makers for these exchange traded products.  That means the job is available to anyone who places new orders that define the bid/ask spread.

Disclosure:  No positions in the mentioned securities.  Market conditions are constantly changing.  The examples above were derived from the following live quotes obtained at approximately 10:30am EST on Friday, March 6, 2009: UBD  bid= $25.00, ask=$53.50;  UEM bid= $20.00, ask=$39.00; GBB  bid= $37.00, ask=$45.67; AYT  bid= $0.15, ask=$41.87.

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