I was an OTC MM for about 10 years ending in web design flat trend forex late 80’s. Since then I have been strictly an investor.
Since I have not been that up to date in MM rules I will only make statements that I feel fairly confident are still accurate regarding these activities. They just try to make orderly markets. When dealing with BB stocks it is very easy for a MM to get trapped into being short in dealing in a fast moving market. So they have to rely on what’s known as the “call” from larger retail houses. If a “Big” retail firm like an E-trade calls up a market maker to purchase say 5,000 shares of a stock, they expect to get an “execution” from that market maker. If he turns them down, or only gives a partial then the “Big” firm will go to another MM.
This will go on until he “fails” to perform and so on. Even though this MM might in fact be the “high bid” and not really want to sell any more. As a wholesaler he must perform or he will get a reputation as a “non-performer” with the “Big” houses and will cease getting “calls” which means he will soon go out of business. I mentioned above that this activity is very significant to BB stocks.
I say this because most of the trades in these BB stocks are “unsolicited” and are done through discount houses. He fills the order and is now short 1,000 shares. He may raise his bid hoping to find a seller to “flatten” out his position. Just like investors, MM Hate to take a loss. So 9 times out of 10 he will now sell 2000 at 1. 00 making him short 4000 but with an average . At this time he would love to see a seller at .