A market maker is a firm who quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread. In Economics, a financial market is a mechanism that allows people to easily buy and sell ( Trade) financial Securities (such as stocks and bonds The bond market (also known as the debt, credit, or fixed income market) is a Financial market where participants buy and sell Debt Fixed income refers to any type of Investment that yields a regular (or fixed return A Corporate Bond is a bond issued by a Corporation. The term is usually applied to longer-term debt instruments generally with a maturity date falling at least a A government bond is a bond issued by a national government denominated in the country's own Currency. In the United States, a municipal bond (or muni) is a bond issued by a city or other local government or their agencies Bond valuation is the process of determining the Fair price of a bond. In Finance, a high yield bond ( non-investment grade bond, speculative grade bond or junk bond) is a bond that is rated below A stock market, or (equity market is a private or public market for the trading of company Stock and derivatives of company Software for Fixed assets management and Stock control developed in 2004. Preferred stock, also called preferred shares or preference shares, is typically a higher ranking stock than Voting shares, and its terms are negotiated A voting share (also called common stock or ordinary share) is a share of Stock giving the Stockholder the right to vote on matters A Registered share is a Stock that is registered on the name of the exact owner A voting share (also called common stock or ordinary share) is a share of Stock giving the Stockholder the right to vote on matters A stock exchange, share market or bourse is a Corporation or Mutual organization which provides "trading" facilities for Stock The foreign exchange ( currency or forex or FX) market refers to the market for currencies. The derivatives markets are the Financial markets for derivatives The market can be divided into two that for exchange traded derivatives and that for In Finance, a credit derivative is a derivative whose value derives from the Credit risk on an underlying bond loan or other financial asset '"Hybrid securities"' often referred as "hybrids" are a broad group of securities that combine the elements of the two broader groups of securities Debt and Options are financial instruments that convey the right but not the obligation to engage in a future transaction on some Underlying security, or in a Futures In Finance, a futures contract is a standardized Contract, traded on a Futures exchange, to buy or sell a certain Underlying instrument A forward contract is an agreement between two parties to buy or sell an asset at a specified point of time in the future For the Thoroughbred horse racing champion see Swaps (horse. In finance a swap is a derivative in which two counterparties Commodity markets are markets where raw or primary products are exchanged In Finance, the money market is the global Financial market for short-term borrowing and lending Over-the-counter ( OTC) trading is to Trade Financial instruments such as Stocks bonds, commodities or derivatives Real estate is a legal term (in some jurisdictions notably in the USA, United Kingdom The spot market or cash market is a Commodities or Securities market in which goods are sold for Cash and delivered immediately The field of finance refers to the concepts of Time, Money and Risk and how they are interrelated In Economics, a financial market is a mechanism that allows people to easily buy and sell ( Trade) financial Securities (such as stocks and bonds There are two basic financial market participant categories Investor vs Corporate finance is an area of Finance dealing with the financial decisions Corporations make and the tools and analysis used to make these decisions Personal finance is the application of the principles of Finance to the monetary decisions of an individual or family unit Public finance is a field of economics concerned with paying for collective or governmental activities and with the administration and design of those activities A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money Financial regulations are a form of Regulation or supervision which subjects Financial institutions to certain requirements restrictions and guidelines aiming to Companies law (or the law of business associations) is the field of Law concerning business and other organizations Financial instruments are cash evidence of an ownership interest in an entity or a contractual right to receive or deliver cash or another financial instrument A commodity is anything for which there is demand but which is supplied without qualitative differentiation across a market The bid/offer spread (also known as bid/ask spread) for assets (such as Stock, Futures contracts options, or Currency pairs is
In foreign exchange trading, where most deals are conducted Over-the-Counter and are, therefore, completely virtual, the market maker sells to and buys from its clients. Over-the-counter ( OTC) trading is to Trade Financial instruments such as Stocks bonds, commodities or derivatives Hence, the client's loss and the spread is the market-maker firm's profit, which gets thus compensated for the effort of providing liquidity in a competitive market. This extra liquidity reduces transaction costs and therefore facilitates trades for the clients, who would otherwise have to accept a worse price or even not be able to trade at all. Most foreign exchange trading firms are market makers and so are many banks, although not in all currency markets.
Most stock exchanges operate on a matched bargain or order driven basis. A stock exchange, share market or bourse is a Corporation or Mutual organization which provides "trading" facilities for Stock In such a system there are no designated or official market makers, but market makers nevertheless exist. When a buyer's bid meets a seller's offer or vice versa, the stock exchange's matching system will decide that a deal has been executed.
In the United States, the New York Stock Exchange (NYSE) and American Stock Exchange (AMEX), among others, have a single exchange member, known as the "specialist," who acts as the official market maker for a given security. The New York Stock Exchange ( NYSE) is a Stock exchange based in New York City. The American Stock Exchange ( AMEX) is an American Stock exchange situated in New York. In return for a) providing a required amount of liquidity to the security's market, b) taking the other side of trades when there are short-term buy-and-sell-side imbalances in customer orders, and c) attempting to prevent excess volatility, the specialist is granted various informational and trade execution advantages. Market liquidity is a Business, Economics or Investment term that refers to an Asset 's ability to be easily converted through an act of buying
Other U. S. exchanges, most prominently the NASDAQ Stock Exchange, employ several competing official market makers in a security. The NASDAQ (acronym of National Association of Securities Dealers Automated Quotations) is an American Stock exchange. These market makers are required to maintain two-sided markets during exchange hours and are obligated to buy and sell at their displayed bids and offers. They typically do not receive the trading advantages a specialist does, but they do get some, such as the ability to naked short a stock, i. Naked short selling, or naked shorting, is the practice of selling a stock short, without first borrowing the shares or ensuring that the shares can be borrowed as e. , selling it without borrowing it. In most situations, only official market makers are permitted to engage in naked shorting.
On the London Stock Exchange (LSE) there are official market makers for many securities (but not for shares in the largest and most heavily traded companies, which instead use an automated system called TradElect). The London Stock Exchange or LSE is a Stock exchange located in London, England. Some of the LSE's member firms take on the obligation of always making a two way price in each of the stocks in which they make markets. It is their prices which are displayed on the Stock Exchange Automated Quotation system, and it is with them that ordinary stockbrokers generally have to deal when buying or selling stock on behalf of their clients. The Stock Exchange Automated Quotation system (or SEAQ) is a system for trading Mid-cap LSE stocks A stock broker or stockbroker is a qualified and regulated professional who buys and sells shares and other securities through Market makers or
Proponents of the official market making system claim market makers add to the liquidity and depth of the market by taking a short or long position for a time, thus assuming some risk, in return for hopefully making a small profit. Market liquidity is a Business, Economics or Investment term that refers to an Asset 's ability to be easily converted through an act of buying In Finance, short selling or "shorting" is the practice of selling a Financial instrument that the seller borrows first (does not own and then In finance a long position in a security such as a Stock or a bond, or equivalently to be long in a security means the holder of the position owns the On the LSE one can always buy and sell stock: each stock always has at least two market makers and they are obliged to deal.
This contrasts with some of the smaller order driven markets. On the Johannesburg Securities Exchange, for example, it can be very difficult to determine at what price one would be able to buy or sell even a small block of any of the many illiquid stocks because there are often no buyers or sellers on the order board. However, there is no doubting the liquidity of the big order driven markets in the U. S.
Unofficial market makers are free to operate on order driven markets or, indeed, on the LSE. They do not have the obligation to always be making a two way price but they do not have the advantage that everyone must deal with them either.