Thread by @patio11

This is an... extraordinary article in the Wall Street Journal about stock internalization, etc.

wsj.com/articles/excha…

I feel like I have a strong presumption that if one is writing for the Wall Street Journal one understands how stock works, but that's a rebuttable presumption, and:

It's far too easy on Twitter to dunk for the sake of dunking. I'm going back and forth and trying to introspect whether I'm doing that. I don't think I am:

The reason why a hedge fund wouldn't participate in later gains of Apple stock if they sold their Apple stock is trivial.

If you sell your stock, regardless of your contra, you will not participate in future price movements of the stock. That is, presumably, a major reason why you are selling your stock.

If you sell your stock to retail investors, and then a pension fund buys a million shares of Apple, you still won't participate in the later gain of the stock caused by the price impact of the pension fund's order.

If that is a problem... you don't want to sell your Apple stock.

Also, from a "Why do we have stock exchanges, at all?" perspective, they form Schelling points to aggregate demand and supply. It is *extremely unlikely* that there are 100 dentists, engineers, and small business owners who want ~$22k of Apple at *exactly* time hedge fund sells.

Thus the existence of market makers, including HFTs, who guarantee (for institutional investors) that if you want to sell 10k shares of Apple immediately for ~$2.2 million that you will be able to do this at a frictional cost so low that you'd assume I'm joking.