market maker

Definition

A brokerage or bank that maintains a firm bid and ask price in a given security by standing ready, willing, and able to buy or sell at publicly quoted prices (called making a market). These firms display bid and offer prices for specific numbers of specific securities, and if these prices are met, they will immediately buy for or sell from their own accounts. Market makers are very important for maintaining liquidity and efficiency for the particular securities that they make markets in. At most firms, there is a strict separation of the market-making side and the brokerage side, since otherwise there might be an incentive for brokers to recommend securities simply because the firm makes a market in that security.

Use market maker in a sentence

They were the market maker and I respected that and actually wanted to know more about how they functioned every day.

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You should always try to have a good reputation with the market maker so that you can continue to do business together.

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When you buy product from the grocery store, you are not buying directly from the farm. Instead, you deal with an entity that set the price for you based on many different factors. The market maker can be seen as the grocery store, and it dictates the amount you pay.

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