Market-Maker

This product was added on the quality assurance side of the portal business arising from the substantive and / or formal defects. You can help by you are removing the deficiencies mentioned there or you engaged with any of the discussion.

Market-makers ( German market maker or market maker ) is defined as a stockbroker, which ensures the tradability (market liquidity) of securities by continuously quoting bid and ask prices and compensates for temporary imbalances between supply and demand in less liquid stocks.

Background

Although market making and Designated Sponsoring are often used interchangeably, they are indeed similar, but strictly speaking, quite different activities. In contrast to the designated sponsoring ensuring the liquidity is not carried out on behalf of an issuer, but to obtain their own perks. How to obtain a stockbroker that guarantee liquidity for example at least 85 % in the course of an activity as a market maker on Eurex for a certain number of investment securities as compensation certain discounts on the payable trading fees.

To ensure liquidity published by the Market Maker binding bid and ask prices (buying and selling rates), so-called quotes, trading of listed items. Due to the increased tradability of the attractiveness and price quality to the supervised values ​​increase and ensure investors buy or can be sold within the trade time at reasonable prices. The acquired in this way is intended to promote confidence in the long run a positive development. He is bound by a maximum spread (the difference between bid and ask price ). This continuous points of courses is doing nowadays taken over almost entirely by computer programs ( so-called quote machines ).

On the NASDAQ market-maker companies are both in commission and in proprietary trading works and represent a large part of the turnover on NASDAQ. There are currently a total of 550 market-making firms, of which only about 10 are really important. All market-maker in the U.S. must be a member of the NASD ( National Association of Securities Dealers ) and meet certain conditions, such as demonstrate a minimum level of capital, for example. The market maker can use a four-digit abbreviation, are the so-called market maker identifier that MMID identified.

Types of market making

There are generally three types of Market Making:

• In the permanent quota ( Permanent Market Making, PMM), the market maker a permanent buy and sell orders to a value in the trading system.
• The extended quotation ( Advanced Market Making, AMM) specified minimum criteria are met by the relevant Exchange, to obtain corresponding reimbursements or reductions.
• In the quotation on request (Regular Quotation), the market maker a price on special request of a market participant.

• Trading