<blockquote>
  <p>My broker gives money to Goldman Sachs which gives a share at an arbitrary price.</p>
</blockquote>

<p>If you're dealing with US stocks, <a href="https://en.wikipedia.org/wiki/Regulation_NMS" rel="nofollow noreferrer">Regulation National Market System</a> prevents brokers from giving you a <a href="https://www.law.cornell.edu/cfr/text/17/242.611" rel="nofollow noreferrer">price that is worse than the national best bid and offer</a>.</p>

<p>As noted by a blog post on <a href="https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/" rel="nofollow noreferrer">kalzumeus.com</a>,</p>

<blockquote>
  <p>Payment for order flow is a minor footnote to the story of discount
  brokerages, in the same fashion that HFT is basically irrelevant to
  retail traders except for decreasing their cost of trading by
  decimating spreads.</p>
  
  <p>Schwab earned 1.4% of revenue from payment for order flow, TD
  Ameritrade about 8.4%, and E*TRADE about 6.1%.</p>
  
  <p>Interactive Brokers has historically been quite reticent about
  participating in internalization, because it doesn’t play well with
  their sophisticated clients; they earn about 1.1% from it.</p>
</blockquote>

CC BY-SA 4.0
2019-09-27T06:56:48.603Z
What percentage of revenue does Goldman Sachs get from manipulation
user24375
CC BY-SA 4.0
2019-09-27T07:17:51.623Z
You can look at their 10K: https://www.goldmansachs.com/investor-relations/financials/current/10k/2018-10-k.pdf . It looks like they make around 25% of revenues from market making. Perhaps a small fraction of that comes from manipulative behavior but they certainly wouldn't disclose that and any large resulting profits would go under scrutiny.
Kent Shikama
CC BY-SA 4.0
2019-09-27T07:26:53.923Z
If you include ipo underwriting, trading, and other forms I bet it would be near 50%
user24375
CC BY-SA 4.0
2019-09-27T07:50:02.280Z
Perhaps you can argue all these activities have little societal value but arguing that it is manipulation is a harder sell.
Kent Shikama
CC BY-SA 4.0
2019-09-27T16:09:51.803Z
I'm pretty sure the only way they can  profit on trading (since they suck at their stock predictions) is manipulation, and IPOs usually underperform because of the salesmanship of the bank
user24375
CC BY-SA 4.0
2019-09-27T06:30:43.500Z
2019-09-27T06:30:43.500Z
Kent Shikama
<p>When  I buy a stock I don't actually buy anything. My broker gives money to Goldman Sachs which gives a share at an arbitrary price. And they collect a profit on the difference between the price for the person who gave them a share and what they charged me. </p>

<p>Why is this any different from market manipulation?</p>

<p>Is manipulation ok as long as it is within the bid ask spread?</p>

CC BY-SA 4.0
2019-09-27T06:13:39.523Z
You can't manipulate something that wouldn't have existed without you?
Art
CC BY-SA 4.0
2019-09-27T16:19:11.200Z
So basically wash trading
user24375
<regulation>
How is market making not considered manipulation?
user24375
# How is market making not considered manipulation?

(Asked by: username_0 on 2019-09-27)

When I buy a stock I don't actually buy anything. My broker gives money to Goldman Sachs which gives a share at an arbitrary price. And they collect a profit on the difference between the price for the person who gave them a share and what they charged me.

Why is this any different from market manipulation?

Is manipulation ok as long as it is within the bid ask spread?

**Tags:** regulation

> **Comments:**
> **username_1**: You can't manipulate something that wouldn't have existed without you?  
> **username_0**: So basically wash trading  

---

## 1 answers

### Answer by username_2 on 2019-09-27. Score: 0 | Accepted answer

> My broker gives money to Goldman Sachs which gives a share at an arbitrary price.

If you're dealing with US stocks, [Regulation National Market System](https://en.wikipedia.org/wiki/Regulation_NMS) prevents brokers from giving you a [price that is worse than the national best bid and offer](https://www.law.cornell.edu/cfr/text/17/242.611).

As noted by a blog post on [kalzumeus.com](https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/),

> Payment for order flow is a minor footnote to the story of discount
> brokerages, in the same fashion that HFT is basically irrelevant to
> retail traders except for decreasing their cost of trading by
> decimating spreads.
>
> Schwab earned 1.4% of revenue from payment for order flow, TD
> Ameritrade about 8.4%, and E\*TRADE about 6.1%.
>
> Interactive Brokers has historically been quite reticent about
> participating in internalization, because it doesn’t play well with
> their sophisticated clients; they earn about 1.1% from it.

> **Comments:**
> **username_0**: What percentage of revenue does Goldman Sachs get from manipulation  
> **username_2**: You can look at their 10K: https://www.goldmansachs.com/investor-relations/financials/current/10k/2018-10-k.pdf . It looks like they make around 25% of revenues from market making. Perhaps a small fraction of that comes from manipulative behavior but they certainly wouldn't disclose that and any large resulting profits would go under scrutiny.  
> **username_0**: If you include ipo underwriting, trading, and other forms I bet it would be near 50%  
> **username_2**: Perhaps you can argue all these activities have little societal value but arguing that it is manipulation is a harder sell.  
> **username_0**: I'm pretty sure the only way they can  profit on trading (since they suck at their stock predictions) is manipulation, and IPOs usually underperform because of the salesmanship of the bank  

---

