Where Do Initial Shares Come From?

Looking at the no market maker - NZX50.6JAN12.UP - stock which has no buy or sell orders currently as it has just been launched, I wonder where do the initial shares come from. I have two theories.

1. Admin creates the initial shares and trades them at a price they choose.
2. Shares are put into circulation when one person fills another persons buy order by shorting. This adds shares into the market which will eventually have to be returned to the imaginary entity that loaned you the shares to sell/short.

If that makes any sense?

I would love to here from someone who knows the answer.



Edited 1 time(s). Last edit at 01/05/2012 06:13PM by MaxTheCreator.

Yes Option 2 I think.
For a market with no MM, when you offer to buy and someone sells (or vice-versa) then those shares come into existence.
Remember (generally) they will close at either $0 or $1 (sometimes in between).



Edited 1 time(s). Last edit at 01/05/2012 10:04PM by TraderV.

Great, thanks TraderV