|Glossary Term: MARKET MAKER|
Definition(s) for MARKET MAKER:
1. ) Brokerage and securities firms that are required by the rules of a stock market or exchange to both buy and sell securities of a quoted company, for which they act as market marker, at bid and offer prices which they quote. All Nasdaq-traded and EURONEXT-
2. ) A broker/dealer who is registered to trade in a given security on the NASDAQ.
3. ) A Securities firm which is obliged to offer to buy and sell securities in which it is registered throughout the mandatory quote period.
4. ) Market-making is a critical component in the development of liquid markets. Market makers do not attempt to profit from predicting the future trends in prices. Rather, their focus is to identify the equilibirum price at which demand and supply are balanced at a given moment.After correctly identifying the equilibrium price, the market maker offers a two-way price (ie. bid and offer) and thus providing liquidity to the market and supplies prices for buyers and sellers. 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.The reward is the benefit of spread between bid and offer prices. By selling to and buying from different people, the market makers get the benefit of spread between his buying (ie. bid) and his selling (ie. offer) price.