Loading the player...

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.

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.

RELATED TERMS
  1. Floor Broker (FB)

    A floor broker is an independent member of an exchange authorized ...
  2. Market Maker

    A broker-dealer firm that accepts the risk of holding a certain ...
  3. Hybrid Market

    A securities exchange that facilitates trading through a blend ...
  4. Two Dollar Broker

    A floor broker who executes orders for other brokers who cannot ...
  5. Ax

    The market maker who is most central to the price action of a ...
  6. Floor

    The lowest acceptable limit as restricted by controlling parties. ...
Related Articles
  1. Personal Finance

    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.
  2. Trading

    Understanding Order Execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
  3. Trading

    High-Frequency Trading: A Primer

    An in depth look at how high-frequency trading works and who the players are.
  4. Trading

    Is Your Forex Broker A Scam?

    While the forex market is slowly becoming more regulated, there are many unscrupulous brokers who should not be in business.
  5. Investing

    How Nasdaq Continues To Innovate

    For centuries, a stock market was a physical arena where buyers and sellers traded shares. Then the NASDAQ opened and changed everything.
  6. Investing

    Picking your first broker

    If you're a rookie investor, choosing a broker may be your first big investment decision. Learn more on whether you should you go with a full-service broker or a discount broker.
  7. Trading

    The Best Low-Cost, Web-Based Trading Brokers

    With this table, investors can differentiate between top low-cost, web-based trading brokers by price, capabilities, and offerings.
  8. Investing

    The Foreign Exchange Interbank Market

    Can your forex broker offer you the most competitive pricing? Learn how the market's biggest players affect you.
RELATED FAQS
  1. Why are traders on the floor of the exchange?

    Learn how trading on the floor of the stock exchange has evolved over time with computers now managing the majority of buying, ... Read Answer >>
  2. What exactly is being done when shares are bought and sold?

    Most stocks are traded on physical or virtual exchanges. The New York Stock Exchange (NYSE), for example, is a physical exchange ... Read Answer >>
  3. Why Do Brokers Ask for Personal Information?

    There are 3 reasons a broker needs personal information: suitability, record-keeping and the law. Read Answer >>
Hot Definitions
  1. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  2. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  3. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  4. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
  5. Monte Carlo Simulation

    Monte Carlo simulations are used to model the probability of different outcomes in a process that cannot easily be predicted ...
  6. Price Elasticity of Demand

    Price elasticity of demand is a measure of the change in the quantity demanded or purchased of a product in relation to its ...
Trading Center