1

I see some particular stocks have exactly same size between Bid Size and Ask Size. Why does it happen? Do those who place the buy and sell are actually the same counterparty? If so, why do they do that?

enter image description here

1
  • 2
    Speculation: the sizes on both sides are being maintained by "market makers" who have agreements to maintain (close to) the same volume on each side. The "occasional changes" you see (comment to answer) would, presumably, be the result of a trade happening, after which the (one of the) market-maker(s) throw out a new bid to restore the desired size.
    – TripeHound
    Nov 19, 2018 at 13:58

1 Answer 1

2

If its not a data issue, this is also pretty standard behavior from market makers, who make a profit from the spread between these two prices and will often put up identical/similar size blocks both sides of the order book, in some situations (such as designated market makers) market makers will also be obliged to offer x level of liquidity in return for their position and these values will be basically the same all the time.

3
  • 1
    So they try to provide liquidity of the stock, right? Then what if when the price starts falling, everyone sells their shares and the market makers have to buy? Won't the market makers end up with a lot of stocks of which value has go down substantially and therefore losing money?
    – rcs
    Nov 20, 2018 at 5:33
  • 1
    Yes, this is one of the many risks market makers face when putting up money on both sides of the spread, in a similar way to the issues bookmakers face when betting becomes very one sided on an event. They fight this in a variety of ways, most notably just having quite small amounts of liquidity available so very big players can't just run them over in one direction, although a full explanation of their strategies is a book's worth of information (if not more).
    – Philip
    Nov 20, 2018 at 10:13
  • 1
    @rcs "everyone sells their shares and the market makers have to buy" Following on from Philip's comment: as I (imperfectly) understand it, market makers are there to guarantee liquidity if there is little "normal" liquidity. If "something happens" so that there is a lot of "real" activity, then they can step back; when things quieten down, they will return. And, like bookmakers, although they will take an occasional "hit" when a stock they are providing liquidity for "runs", they are big enough so that their gains the rest of the time make up for it.
    – TripeHound
    Nov 21, 2018 at 8:11

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .