Opinion ID: 2565
Heading Depth: 3
Heading Rank: 2

Heading: Market Makers

Text: Market makers promote the efficiency of a security's market because they react swiftly to company news and reported financial results by buying or selling stock and driving it to a changed price level. Cammer, 711 F.Supp. at 1287. We begin with the SEC's definition of a market maker as a dealer who, with respect to a particular security, (i) regularly publishes bona fide, competitive bid and offer quotations in a recognized interdealer quotation system; or (ii) furnishes bona fide competitive bid and offer quotations on request; and, (iii) is ready, willing and able to effect transactions in reasonable quantities at his quoted prices with other brokers or dealers. 17 C.F.R. § 240.15c3-1[c]8 (2006). Teamsters made three main arguments in support of its claim that market makers for the Certificates existed. First, its expert opined that the lead underwriters of each class of the Certificates acted as market makers because the Certificates are analogous to equity IPOs. Ronen Supp. Aff. ¶ 24. Second, based on her analysis of trading records, Ronen concluded that a number of additional firms that were not underwriters also served as market makers. Id. Third, Joseph McAdams, the bond trader for Teamsters' investment advisor, testified that he [felt] confident that on any given day during the class period, he could have obtained a quote from any one of a number of broker-dealers. McAdams also testified that between 2002 and 2005, he was aware of specific bids or offers for the Certificates, and that he believed that [t]here were six to seven dealers that ... have been and did continue to be active in the manufactured housing market. The appellees, relying on Carron's affidavit, disputed the existence of market makers for the Certificates. He attested that a market maker is by definition an entity that commit[s] to buy (bids) and to sell (offers) the security at specified prices. Carron Aff. ¶ 46. Carron faulted Ronen's study identifying six non-underwriter market makers because it was based on transaction data that did not demonstrate that the firms actually made active bids/offers. Id. The district court concluded that Teamsters did not demonstrate that any firm regularly publish[ed] bids and quotes for the Certificates, or that any firm would furnish bids and quotes on request and ... would effect transactions for each Certificate. Teamsters, 2006 WL 2161887, at  11. It also rejected Ronen's argument that the lead underwriter acted as a market maker for the Certificates because the Certificates were analogous to equity IPOs. Id. The district court believed that Teamsters should have, but did not, independently show that the Certificate market was efficient. Id. This finding was not erroneous. The district court considered Teamsters' evidence and found that it failed to show that firms engaged in either of the two activities identified by the SEC as defining a market maker. Id. Although Ronen attested that both underwriters and non-underwriters made a market in the Certificates, according to Carron, the limited trading data on which her conclusion was based did not indicate that the firms actually furnished bids or quotes on request, or were ready, willing, and able to effect transactions in the Certificates. Moreover, although the district court did not mention McAdams' testimony on the issue of market makers, there was no need for it to do so. Nothing in his testimony compelled a finding that there were firms that actually furnished bids and offered quotations on request, or were prepared to effect transactions in the Certificates the way that market makers would have done. [13] Teamsters has not pointed us to evidence that would compel a different finding. [14]