Third Market Maker

AAA

DEFINITION of 'Third Market Maker'

A third-party securities dealer that is ready and willing to buy or sell stocks listed on exchanges at publicly quoted prices. Third market makers add liquidity to financial markets by facilitating buy and sell orders even if there isn't a buyer or seller immediately available for the other side of the transaction. Third market makers make a profit from their roles as intermediaries by buying low and selling high. They also place trades for brokers on exchanges of which that broker is not a member.

INVESTOPEDIA EXPLAINS 'Third Market Maker'

A broker also facilitates the buying and selling of securities, but he or she accomplishes this task by directly matching up buy and sell orders. A third market maker might act as a buyer when an investor wants to sell, but he or she just wants to make a small, short-term profit from buying a security at a favorable price and selling it to another investor at a higher price. Third market makers sometimes pay brokers a small fee of a cent or two per share to direct orders their way. Sometimes brokers and third market makers are one in the same.

RELATED TERMS
  1. Market-Maker Spread

    The difference between the price at which a market maker is willing ...
  2. Broker-Dealer

    A person or firm in the business of buying and selling securities, ...
  3. Payment For Order Flow

    The compensation and benefit a brokerage receives by directing ...
  4. Clearing House

    An agency or separate corporation of a futures exchange responsible ...
  5. Ask

    The price a seller is willing to accept for a security, also ...
  6. Crossed Market

    A situation arising when the bid price of a security exceeds ...
Related Articles
  1. Investing

    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 between buyers and sellers, usually for a commission. A market ...
  2.  These are the two main types of trades that investors will encounter: principal and agent transactions.
    Investing Basics

    Principal Trading and Agency Trading

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
  3. Investing Basics

    Understanding Order Execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
  4. Forex Education

    Market Makers Vs. Electronic Communications Networks

    Learn the pros and cons of trading forex through these two types of brokers.
  5. 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.
  6. What's a Marketable Security?
    Active Trading

    What's a Marketable Security?

    Marketable securities are financial instruments that can be readily bought and sold in a public market. The key feature is the ease with which it can be sold and converted into cash. Usually, ...
  7. Stock Analysis

    Buyinb Facebook Stock, A Beginner's Guide

    This straightforward guide helps the novice investor feel more adept at buying a stock, such as Facebook (FB).
  8. Brokers

    Key Differences Between M&A Advisors And Business Brokers

    For a buy, sale or partnership for one's business, one needs brokers and advisors to proceed ahead. Here are the key differences between business brokers and M&A advisors.
  9. Trading Strategies

    Not All Online Trading Brokers Are Created Equal

    The online trading broker market is becoming more and more competitive. Small differences between them can add up to big fee savings for you--or losses.
  10. Trading Strategies

    How do technical analysts interpret the Average Directional Index (ADI)?

    Learn what the average directional index is and why technical analysts look towards ADX indicators to measure the strength of price trends.

You May Also Like

Hot Definitions
  1. 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 ...
  2. Commodity

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

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

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

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

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center