Designated Market Maker - DMM


DEFINITION of 'Designated Market Maker - DMM'

A market maker that is obligated to maintain fair and orderly markets for an assigned set of listed firms. Formerly known as specialists, the designated market maker is a point of contact for the listed company, and provides the company with information, such as the mood of traders and who has been trading the stock. Quotes offered by the DMM are on par with what floor brokers offer, and the DMM is obligated to quote at the national best bid or offer for a percentage of the time.


Loading the player...

BREAKING DOWN 'Designated Market Maker - DMM'

The designated market maker position is relatively new to the New York Stock Exchange. This type of position was added in order to increase competitiveness and market quality as electronic trading becomes more and more widespread. Announced in 2008, the DMM is considered a value-added service offering higher touch than what an electronic-only platform can provide.

Brokers, who represent the interests of financial institutions, pension funds, and other organizations investing in the market, work with designated market makers to make a trade. On the trading floor of the NYSE, DMMs are positioned in the center of the room while floor brokers are located along the room’s periphery.

One of the bigger changes from the specialist role, which the DMM replaces, involves the trade information that a DMM has access to. Designated market makers do not have access to information on who has bought or sold a security until after the trade is made, meaning that the DMM does not have inside information and faces the same risks as other market participants. This levels the playing field between the DMM and floor brokers.

  1. Floor Broker (FB)

    An independent member of an exchange who is authorized to execute ...
  2. Power Broker

    An individual who, through his or her connections, is able to ...
  3. Outside Broker

    1. A real estate salesperson and deal facilitator who works for ...
  4. NYSE Arca

    A securities exchange in the U.S. on which stocks and options ...
  5. NYSE Amex Equities

    An American stock exchange owned by NYSE Euronext. The NYSE Amex ...
  6. NYSE Amex Composite Index

    An index made up of stocks that represent the NYSE Amex equities ...
Related Articles
  1. Investing Basics

    Picking Your First Broker

    If you're a rookie investor, your first big investment decision should be an informed one.
  2. Investing Basics

    The Auction Method: How NYSE Stock Prices are Set

    The New York Stock Exchange (NYSE), sometimes referred to as “the big board,” is the oldest and largest stock exchange in the United States. NYSE is the place investors think of when ...
  3. Brokers

    Evaluating Your Stock Broker

    Make sure you're getting the best service by staying informed and involved.
  4. Forex Education

    How To Pay Your Forex Broker

    Three types of commissions are used in this market. Learn how to get the best deal.
  5. Investing Basics

    Role Of A Market Maker

    A market maker is a firm or an individual that stands ready to buy and sell a particular security throughout the trading session to maintain liquidity and a fair and orderly market in that security. ...
  6. Options & Futures

    The NYSE And Nasdaq: How They Work

    Learn some of the important differences in the way these exchanges operate and the securities that trade on them.
  7. Professionals

    Tips For Fitting In At Your Brokerage Firm

    Part of starting a successful career as a broker is finding the right place to work.
  8. Forex Education

    Market Makers Vs. Electronic Communications Networks

    Learn the pros and cons of trading forex through these two types of brokers.
  9. Professionals

    How Brokers Can Avoid A Market-Maker's Tricks

    Ensure that you and your clients are getting the best deal by avoiding these three pitfalls.
  10. Insurance

    Full-Service Brokerage Or DIY?

    Determine what you are getting for your fees and commissions and how to get your money's worth.
  1. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  2. What is the difference between shares outstanding and floating stock?

    Shares outstanding and floating stock are different measures of the shares of a particular stock. Shares outstanding is the ... Read Full Answer >>
  3. What is the difference between market risk premium and equity risk premium?

    The only meaningful difference between market-risk premium and equity-risk premium is scope. Both terms refer to the same ... Read Full Answer >>
  4. What is the difference between the QQQ ETF and other indexes?

    QQQ, previously QQQQ, is unlike indexes because it is an exchange-traded fund (ETF) that tracks the Nasdaq 100 Index. The ... Read Full Answer >>
  5. What is the difference between an investment and a retail bank?

    The activities and types of clients for an investment bank versus those for a retail bank highlight the primary difference ... Read Full Answer >>
  6. Will technology ever disrupt the role of the custodian bank?

    Custodian banks, along with other financial institutions that hold custodian accounts, are likely to be disrupted but not ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  2. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  3. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  4. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  5. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the ...
Trading Center