Market Maker

What Does Market Maker Mean?
A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds.

Investopedia explains Market Maker
The Nasdaq is the prime example of an operation of market makers. There are more than 500 member firms that act as Nasdaq market makers, keeping the financial markets running efficiently because they are willing to quote both bid and offer prices for an asset.

Filed Under: Brokers

Related Terms

Broker-Dealer
Dealer Market
Electronic Communication Network - ECN
Market Depth
Market Maker Spread
Mismatch Risk
One-Way Market
Redemption Mechanism
Specialist
Supplemental Liquidity Provider - SLP
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Related Links

Electronic Trading: The Role of a Market Maker - Learn how the Nasdaq''s market makers enter orders and maintain a two-sided market.
How To Work Around A Market Maker's Tricks - Ensure that you and your clients are getting the best deal by avoiding these three pitfalls.
Evaluating Your Broker - Make sure you're getting the best service by staying informed and involved.
The Market Participant Playbook - Find out what effect institutional investors have on the stock market and individual traders.
Adding Leverage To Your Forex Trading - The use of margin to trade in the foreign exchange market can magnify profit opportunities.
Markets Demystified - Knowing how the primary and secondary markets work is key to understanding how stocks trade.
Understanding Order Execution - Find out the various ways in which a broker can fill an order, which can affect costs.
Conversion Arbitrage - This stock/options combination helps traders take advantage of market mispricing. Find out how.
The Foreign Exchange Interbank Market - Can your forex broker offer you the most competitive pricing? Learn how the market's biggest players affect you.
The Global Electronic Stock Market - The way trading is conducted is changing rapidly as exchanges turn toward automation.
Introduction To Level II Quotes - Find out what's happening in a given stock with this service showing Nasdaq market makers' best bid and ask prices.
Traders And Investors' Roles In The Marketplace - Discover how these two groups work together to keep the market functioning properly.
What's the difference between a Nasdaq market maker and a NYSE specialist?
How do I buy an over-the-counter stock?
What are the steps to get a company listed on the OTCBB?
What is the difference between a broker and a market maker?
Is an earnings surprise priced into the opening value by market makers?

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