Questions tagged [market-making]

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Are market makers obligated to keep the option markets liquid?

I know that each stock has at least one market maker that is responsible for keeping the equity market flowing, but what about the options market? Are the respective market makers also bound by ...
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1answer
114 views

Why do market makers sometimes quote absurd bid and ask prices rather than remove their quotes?

The image below shows the Level 2 bids for Fortescue Metals Group Ltd (OTCQX: FSUMF) on 2020-10-07 10:19 am: Notice the 0.01 × 10,000 bid by NITE (Virtu Americas LLC), which is extremely unlikely to ...
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2answers
104 views

How do derivative prices react so quickly to changes in underlying prices?

Just trying to understand something with the market pricing and how it works. There are literally thousands, if not millions of derivatives tied to say an index fund (which in turn are composed of a ...
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1answer
116 views

Who are the market makers for large traders?

I read that market makers, like large investment banks, usually don't like providing liquidity to savy, larger traders because the bank will be on the losing side of transactions. If so, who are the ...
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5k views

Why do market-makers usually win against traders?

I heard that market-makers — like TD Ameritrade and Fidelity – usually make profits while traders do not, especially in foreign exchange. Why is that?
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1answer
107 views

How do market makers avoid losses in their stock inventory?

The Designated Market Makers (DMMs) on NYSE and the Market Makers on NASDAQ hold shares in their inventory in order to facilitate liquidity. Given that stock prices change throughout the day, how do ...
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1answer
107 views

Are there market makers for OTC stocks?

Will I always be able to find a willing buyer/seller for stocks that trade on the OTC markets? In other words, are there market makers for OTC stocks similar to the market makers for NYSE and NASDAQ ...
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1answer
124 views

How much can option market makers influence stock prices?

Do option market makers also hold stock for the options they write? Suppose it's a: $10 billion company $20 stock 23 strike calls @ 30 cents Buy 5000 calls 10 days until expiration I think this ...
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2answers
99 views

Forward contract hedge and market-maker

Referring to McDonald's Derivatives Markets book, a market-maker or arbitrageur must be able to offset the risk of a forward contract. It is possible to do this by creating a synthetic forward ...
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5answers
33k views

Does a market maker sell (buy) at a bid or ask price?

From Fool.com: How Are Stock Prices "Set"?: Assume you want to sell some of your shares of EVE at the current "market" price. The lowest ask price from sellers is $16.00. The ...
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2answers
4k views

Understanding the concepts of market maker and broker

Wikipedia says: A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the ...