Designated Market Maker - DMM

AAA

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.

INVESTOPEDIA EXPLAINS '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.

VIDEO

RELATED TERMS
  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. a list of questions and actions that will help ensure that neither your broker, nor your brokerage firm, is ripping you off
    Brokers

    Evaluating Your Stock Broker

    Make sure you're getting the best service by staying informed and involved.
  4. The forex market, unlike other exchange-driven markets, has a unique feature that many market makers use to entice traders.
    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. 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.
  6. 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.
  7. Forex Education

    Market Makers Vs. Electronic Communications Networks

    Learn the pros and cons of trading forex through these two types of brokers.
  8. 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.
  9. Insurance

    Full-Service Brokerage Or DIY?

    Determine what you are getting for your fees and commissions and how to get your money's worth.
  10. Investing Basics

    Why Wall Street Is A Key Player In The World's Economy

    Wall Street is just one little street in lower Manhattan, but both empirically and symbolically, it continues to make the world go round.

You May Also Like

Hot Definitions
  1. Christmas Island Dollar

    The former currency of Christmas Island, an Australian island in the Indian Ocean that was discovered on December 25, 1643. ...
  2. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  3. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  4. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  5. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  6. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
Trading Center