Market makers

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Adv. Tarun Arora

Adv. Tarun Arora (Querist)
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07 November 2009 What do U mean by d term "Market Makers"?

CA Anil Kumar Tadaka

CA Anil Kumar Tadaka (Expert)
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07 November 2009 A broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in mere seconds.
The Nasdaq is the prime example of an operation of market makers. There are more than 500 member firms that act as Nasdaq market makers, keeping the financial markets running efficiently because they are willing to quote both bid and offer prices for an asset.

CA Anil Kumar Tadaka

CA Anil Kumar Tadaka (Expert)
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07 November 2009 even u Can take this meaning:

Market makers are individuals or representatives of firms whose function is to ensure liquidity in the securities markets, through bids and offers to the public in the absence of an offer from a counterparty. When traders place an order to buy a certain security which nobody is queuing to sell, market makers sell that security from their own portfolio or reserve. Similarly, they will buy a security in absence of other buyers.

In doing so, market orders are continuously moving, eradicating sudden surges and ditches due to buying and selling imbalance. Market makers earn profits through a spread between their buying price (bid) and their selling price (ask). The ask is always higher than the bid, allowing the market maker to profit from their inventory.

Adv. Tarun Arora

Adv. Tarun Arora (Querist)
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07 November 2009 Thanx sir

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