Sunday, December 23, 2007 8:38:38 AM
A market maker is a firm who quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread. Most stock exchanges operate on a matched bargain or order driven basis. In such a system there are no designated or official market makers but market makers nevertheless exist. When a buyer's bid meets a seller's offer (or vice versa) the stock exchange's matching system will decide that a deal has been executed.
Other U.S. exchanges, most prominently the NASDAQ Stock Exchange, employ several competing official market makers in a security. These market makers are required to maintain two-sided markets during exchange hours and are obligated to buy and sell at their displayed bids and offers. They typically do not receive the trading advantages a specialist does, but they do get some, such as the ability to naked short a stock, i.e. selling it without a borrow. In most situations only official market makers are permitted to engage in naked shorting.
Most important thing I get from the above, is that "firms" can be hired to do this, which brings me back to my original question "Is this a Good or a Bad thing ???? Seems to put Companies and Stockholders at the mercy of someone elses interests.
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