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Tuesday, 01/31/2023 11:00:27 AM

Tuesday, January 31, 2023 11:00:27 AM

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https://www.investopedia.com/terms/m/marketmaker.asp


Understanding Market Makers
Many market makers are often brokerage houses that provide trading services for investors in an effort to keep financial markets liquid. A market maker can also be an individual trader, who is commonly known as a local. The vast majority of market makers work on behalf of large institutions due to the size of securities needed to facilitate the volume of purchases and sales.

Each market maker displays buy and sell quotations for a guaranteed number of shares. Once the market maker receives an order from a buyer, they immediately sell off their position of shares from their own inventory. This allows them to complete the order.

A market maker must commit to continuously quoting prices at which it will buy (or bid for) and sell (or ask for) securities.
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Market makers must also quote the volume in which they're willing to trade along with the frequency of time they will quote at the best bid and best offer prices. Market makers must stick to these parameters at all times and during all market outlooks. When markets become erratic or volatile, market makers must remain disciplined in order to continue facilitating smooth transactions.
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