In the over-the-counter (OTC) market, of which the Nasdaq is a large part, the market makers are analogous to the specialists at the exchanges. The market maker creates the bid and ask prices for an OTC security. This person or firm generally maintains inventory and stands ready to buy and sell the security at the quoted price to maintain an orderly market. Just like a specialist on an exchange, the market maker can act as a principal or as an agent.

Quotations on the Nasdaq must be firm: that is, the dealer has to be prepared to trade at least 100 shares at that level.

Exchange Option Markets
The options exchanges have their own cast of characters. These are some of the trading floor participants at the CBOE:

  • Market maker: Increases liquidity by making bids and offers on his or her own account in specific options classes (same role filled by a "registered options trader" on the Amex).

  • Floor broker: Handles public orders, acting solely as an agent.

  • Order book official: Accepts public market or limit orders in specific options classes.

The Amex, where LEAPS and index options are traded, has a participant called a specialist who functions as both a market maker and an order book official.

Secondary markets also exist for the following securities:

  • Corporate bonds (including high-yield)
  • Municipal bonds
  • U.S. Treasury and government agency bonds
  • Repos
  • Commercial paper
  • Negotiable (jumbo) CDs
  • Eurodollar bonds
  • Bankers' acceptances (BAs)
  • Pass-throughs and CMOs

The Currency Market

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