commodity prices, stock prices etc.

konsole

Something that I don't know the answer to and was hoping someone could help me out. I understand that if more people are buying a commodity or stock on the markets, then selling, then the price will go up, and vice versa, but what person or group of people actually determine how much the price of that commodity or stock changes? Is there somewhere that says "if the stock has twice as many people buying then selling then the price is guaranteed go up 1%" or is there someone or some people who determine how much to change it like a market overseeing group or the company that the stock is attached to or what? I'm looking for the actual entity that says "ok the stock or commodity will be priced at this..."

roadrunner

Supply and demand would work in perfect, non-manipulated markets. Such is not the case in stocks or commodities where a few major players can swing the market at will, illegally (quietly) or legally (boldly) as desired. Only 4-6 silver shorts control the bulk of the silver commodities market.

A few weeks ago 3 major banks decided to increase their gold shorts by 5X. The end result was cascading the gold price down some 20%.
No supply or demand equation can factor such abuse into the system. It's ok commodities but not in banking stocks where TPTB get hurt.

roadrunner

RedTiger

On the New York Stock exchange, a single person (or firm), the specialist, sets the price for each stock. That person looks at incoming orders and sets the price accordingly to balance out buy and sell orders. For the specialist, a stable market, where he/she makes steady money off the spread between between bid and ask is what is desirable.

The stock exchange specialist has access to the order book and are rumored to play games based on that knowledge. What kind of games? Say there is a big block buy order for IBM at $121 or lower, and it is currently trading at $121.50. The specialist sees that order on the book, and knows that is a bailout for him/her if the price drops to that level. Another kind of order is a stop-loss order, to sell if the price goes below a certain point. Say there is a big stop-loss order on the books at $120, if the specialist can tick the stock down to that level, he/she can pick up that big block and then float it back up to the more natural equilibrium of $121.50.

Keep in mind, that in any market that for every buyer there is a seller. At any point in time, there are a thousand factors that each buyer or seller or potential buyer and seller might be considering. The price is set where the market finds equilibrium, where the number of buyer and sellers is roughly equal at any point in time. Possible manipulation, potential games are all part of that pricing decision. To put it bluntly, all that information is "in the price."

storm888

"...For the (NYSE) specialist, a stable market, where he/she makes steady money off the spread between between bid and ask is what is desirable. .."

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Yup.

And, on other exchanges, there may be multiple "market-makers;" as opposed to one specialist.

The abundance of MMs, generally makes a market more liquid, but can also lead to collusion
between corrupt MMs.