A market-maker is an individual who facilitates the buying and selling of stocks by providing information on the highest bid price and the lowest ask price. They can be specialists, dealers, or individuals who regularly provide quotes for a specific security and are willing to trade it for their own account.
Market-makers are individuals or companies that play a crucial role in creating a market for securities. They achieve this by reporting bid-and-asked quotations, which essentially means they provide information about the prices at which they are willing to buy and sell securities. Market-makers are typically specialists who are authorized to act as dealers. They can either act as block positioners, dealing with large blocks of securities, or regularly enter quotations in an interdealer communication system. They are willing to buy and sell securities for their own benefit.
When you check a stock quote on a financial website, the bid and ask prices you see are provided by market-makers. For instance, a market-maker may purchase a significant number of shares from an investor who wants to sell quickly. Subsequently, the market-maker can sell these shares to other investors over time. In the case of an initial public offering (IPO), a market-maker may assist in establishing the market for the new stock by providing bid and ask prices. These examples demonstrate how market-makers contribute to the establishment of a securities market by offering price information and engaging in buying and selling activities for their own account.
A market-maker is a financial institution or individual that facilitates the trading of securities by providing liquidity to the market. They do this by quoting both a bid and ask price for a particular security, thereby creating a market for buyers and sellers to transact.
Market-makers make money through the bid-ask spread, which is the difference between the price at which they are willing to buy a security (bid price) and the price at which they are willing to sell it (ask price). They profit from the spread by buying low and selling high.
Yes, market-makers are regulated by financial authorities such as the Securities and Exchange Commission (SEC) in the United States. These regulations aim to ensure fair and transparent trading practices and protect investors.
Market-makers are subject to regulations that prohibit them from engaging in manipulative practices. However, it is important to note that market-makers can influence short-term price movements due to their role in providing liquidity. Long-term stock prices are primarily driven by fundamental factors.
Market-makers determine bid and ask prices based on various factors, including the current market conditions, supply and demand dynamics, and the risk associated with the security. They aim to strike a balance between attracting buyers and sellers while managing their own risk exposure.
Market-makers have the discretion to refuse trading with certain individuals or institutions if they believe it poses a risk to their business or violates regulatory requirements. However, they must adhere to anti-discrimination laws and regulations.
Market-makers play a crucial role in IPOs by underwriting the offering and providing liquidity to the newly listed stock. They help establish an initial market price for the shares and facilitate trading in the secondary market.
Market-makers are primarily responsible for facilitating trading and providing liquidity, rather than offering investment advice. Investors should consult with a financial advisor or conduct their own research before making investment decisions.
Market-makers are not required to disclose their positions in individual securities. However, they are subject to reporting requirements for large positions or when they engage in certain activities that may impact the market.
Market-makers can be held liable for losses incurred by investors if they engage in fraudulent or manipulative practices that directly cause harm. However, losses resulting from normal market fluctuations or investment decisions are generally not the responsibility of market-makers.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 17th April 2024.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
- Page URL:https://dlssolicitors.com/define/market-maker/
- Modern Language Association (MLA):Market-Maker. dlssolicitors.com. DLS Solicitors. May 09 2024 https://dlssolicitors.com/define/market-maker/.
- Chicago Manual of Style (CMS):Market-Maker. dlssolicitors.com. DLS Solicitors. https://dlssolicitors.com/define/market-maker/ (accessed: May 09 2024).
- American Psychological Association (APA):Market-Maker. dlssolicitors.com. Retrieved May 09 2024, from dlssolicitors.com website: https://dlssolicitors.com/define/market-maker/
Our team of professionals are based in Alderley Edge, Cheshire. We offer clear, specialist legal advice in all matters relating to Family Law, Wills, Trusts, Probate, Lasting Power of Attorney and Court of Protection.
All author posts