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.
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Related Terms
specialist, auction market, best-execution requirement, capital commitment, ghosting, inside market, inside spread, last-sale reporting, nominal quotation, passive market-making, real-time trade reporting, two-sided market, facilitation
'market maker
' appears in the definitions of these terms on BusinessDictionary.com
market maker spread, over the counter (OTC) market
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