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Educational Post: The "Market Maker"

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trader53 Member Level  Friday, 06/01/12 04:09:48 AM
Re: trader53 post# 1041
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Educational Post: The "Market Maker"

The Bid and Ask Size,
is controlled by the (MM's) Market Makers,
based upon their 'inside' information.

Market Makers

A market maker is a broker or a dealer firm
that agrees to hold a given number of shares
in a particular stock
thereby allowing for trading to occur.

Upon receiving an order for a stock
the market maker is able to fill the order almost immediately from their own inventory.

What is the "Ax"
The "ax" is a market maker
who currently has the greatest control
over the stock's trading.

They could also be negatively controling
the movement of the stock
and selling heavily into the bid,
driving the bid and price per share down.

The ax may also be working
to keep the price trading sideways
or near the same price.
Keeping the bid and ask very tight.

The ax does not exists at all times,
but it is good to be aware of them when they do.

They are often heavily controling the stock
you are trading or looking to trade.

"Understanding Market Makers"

Market makers use inside knowledge,
experience, and technology to make profits on a daily basis.
They take profits on the stocks they make a market in,
but they also take speculative positions
on the possibility of future price movements
of those stocks –
depending on the time of day,
the market conditions,
and the existing order flow.

Market Maker’s Role and Responsibilities

The major responsibilities of market makers include
the filling of orders on behalf of the customer.

They also fill orders for their own account.
Market makers also benefit from the difference between the ask and the bid prices,
in terms of acting as a dealer.

Market makers are required to post a price
at which they are willing and able to buy and sell.


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