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From: Robert A. Spira
Time: 7:36:48 AM
I am not sure what is going through everyone's mind on this issue but one thing is for sure, each time a stock trades on NASDAQ, effectively you have two or more transactions that show up as volume. When an OTC marketmaker takes stock into his inventory, he registers the transaction and he registers it again when it goes out. If the transaction is done as principal, it is recorded on three occasions.
Let's assume that I am Bill Gates and am making regular sales of Microsoft whenever I am allowed on the securities regulations. I do not particularly register the securities I am selling, they can only be sold under the SEC's one percent rule which takes into account the volume of trading in the previous period when it measures how much an inside can dispose of at one time.
Thus, over the counter the one- percent is two to three times higher than it is on the New York Stock Exchange. Thus, if everything else is equal, an insider can dump a whole lot more shares in that market. We often wonder why the New York Stock Exchange doesnt make some kind of a fuss of this seemingly one-sided arrangement but I guess that everything else they are doing seem to work so well that this small piece of the pie just isn't worth arguing about.