Market Maker

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What is a 'Market Maker'

A market maker is 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.

BREAKING DOWN '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.

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RELATED FAQS
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    The difference between these two market systems lies in what is displayed in the market in terms of orders and bid and ask ... Read Answer >>
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    An earnings surprise is an event where the earnings of a company are greater or lower than the predictions put forth by analysts, ... Read Answer >>
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    What's the main difference between a specialist and a market maker? Not much. Both the New York Stock Exchange (NYSE) specialist ... Read Answer >>
  4. What is the difference between a broker and a market maker?

    A broker is an intermediary who has a license to buy and sell securities on a client's behalf. Stockbrokers coordinate contracts ... Read Answer >>
  5. Does a broker always have to buy a stock if I want to sell it?

    There are certain times when a broker must purchase the stock that you are selling. For example, if the broker is a market ... Read Answer >>
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