News Focus
News Focus
icon url

detailman

01/13/11 2:35 PM

#5400 RE: veronical #5390

Sorry V could not resist.

A market maker is a company, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn.

Market makers play a big role in over the counter markets like the OTC-BB and Pinksheets. Often times, there is not a lot of liquidity and trading volume in these markets, which creates a need for market makers to step in and create a trading environment.

Market makers regulate risk by increasing the spread between the bid and ask prices. When a security exhibits extreme volatility, market makers will increase the spread to give themselves a wider margin for error. Conversely, the spread is narrowed as demand increases and competition between market makers heats up for business.