Questions tagged [market-making]
The market-making tag has no usage guidance.
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How do market-makers make a profit in the bond markets?
Do they sell at ask, buy at bid? Meanwhile, investors buy at ask and sell at bid. So, do the market-makers profit from the bid-ask spread?
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How can brokers profit from spread? [duplicate]
How can brokers profit from spread? Isn’t market makers that profit from spread?
And also how do brokers profit from OTC gain? How does that exactly work?
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Market maker's manipulation
Do market makers in normal trading environment actually manipulate the market?
I just thought since they have to compete with other market makers, they cannot really manipulate the market but I’m not ...
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Do any crypto exchanges still use traditional market making? [closed]
Do crypto trading platforms or DEXs still use traditional market making schemes? Or are there no more traditional market makers out there, only automated market makers that utilize smart contracts?
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Are there market makers in EXT hours?
Are there market makers in EXT hours? or they only work during regular hours?
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Are there market makers in bonds market?
When I order to mkt buy/sell stocks in US primary markets it excuted in seconds. In bonds markets, especialy in US treasuries, if I order to sell my bond or to buy an old bond, could my mkt order last ...
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Why don't traders place limit orders at all prices to be first in line when the price moves?
In markets with price-time priority, why don't traders enter limit orders at all prices, so that they could be first in line when the price moves? For example, if the current best bid is $10 and the ...
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Can NYSE market makers step in front of existing limit orders to fill an incoming market order?
Suppose the lowest offer on stock S is $10. This offer is not the market maker's offer. A trader places a market order to buy stock S on the NYSE. Can the NYSE market maker "intercept" this ...
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Did I give bad advice about investing in market making firms?
Background: I recently explained to an amateur trader (who happens to be a family member) about the basics of the bid-ask spread and how market makers make money from the spread. As an offhand remark, ...
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Do customer orders have higher priority than market makers' orders in the US OTC stock market?
In the US OTC stock market, do customer orders have higher priority than market makers' orders? For example, a market maker is bidding on stock S at $10 for 100 shares. Assume that this is the highest ...
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What happens when a market-maker goes bankrupt during / as a result of an over-extended unsupported position?
The meme stocks have me thinking about the exchange backend. What happens when a market-maker / money-maker has an extreme position in a stock that is now unsupported by shares, just derivatives and ...
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Is the market maker for a particular stock also the market maker for that stock's options?
Is the market maker for a particular stock also the market maker for that stock's options?
... or is it a different person entirely that makes the options markets for that stock?
If it's 2 different ...
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How do market-makers pair up buyers and sellers?
Suppose that Bob wants to buy share X for $100. Sue wants to sell that share for $120. Sarah wants to sell her share for $130. All of them use the same market-maker (e.g., some brokerage website). How ...
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How do stock exchange specialists deal with opening auction imbalances?
I am having some problems understanding stock exchange opening auction imbalances. In Trading and Exchanges by Larry Harris, section 24.5.7 The Market Open, page 508:
Specialists conduct the opening ...
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Can market makers decrease/increase supply or demand?
I didn't fully understand the concept so i have a question,
What I have understood so far is the market makers have a stock inventory and they make quotes about bid and ask price to provide liquidity.
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Are there designated market makers for stock options?
I know that there are individuals and firms who specialize in making markets for options, but are there designated market makers for stock options?
By "designated market maker", I mean a ...
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Why are liquidity suppliers willing to provide "price improvements" when executing orders?
US stock brokers often boast of "price improvement" when speaking of their order execution quality. e.g. "95% of executed market orders received prices better than the National Best Bid ...
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Why do some market makers have many Market Participant Identifiers (MPIDs)?
I noticed that some (most?) market making firms have many Market Participant Identifiers (MPIDs). For example, from the list of NASDAQ market participants1:
"Jane Street Capital, LLC" has ...
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What exactly are Level 2 quotes, and how are they related to the limit order book and "market depth"?
I am trying to understand the definition of "Level 2 quotes" and their relationship to the "limit order book" and "market depth" ("depth of market"). I have ...
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Are market makers also 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 normally, but what about the option markets?
Are the respective market makers also bound ...
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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 10:20 am:
Notice the 0.01 × 10,000 bid by NITE (Virtu Americas LLC), which is extremely unlikely to ...
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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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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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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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How is a market-maker always ready to buy and sell?
How is a market-maker able to make delivery on their bid and ask prices? Do they always have stock ready? Do they go and buy when they want to sell? Do they have to "fund their positions"? ...
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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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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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How do market makers profit from the bid-ask spread when bids are almost always lower than asks?
I am familiar with how currency exchange booths at airports make some of their money: from the bid-ask spread. For example, they will say: "you can sell us 1 USD for 1.32 CAD, and you can buy 1 USD ...
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Does it make sense for a publicly-traded market-maker to profit a lot from a crash?
The Dutch publicly-traded liquidity-provider Flow Traders is doing extremely well on the Amsterdam AEX, which is currently crashing. Does that make sense?
My idea of a market-maker is that their happy ...
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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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Why do market-makers price themselves?
Why bother with an army of quants and complicated pricing models? Why not just use the market price to set your bid/ask and adjust the spread to something sensible and profitable?
I understand if ...
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How do market-maker orders get filled?
My understanding is that a market-maker profits by selling at or above ask and buying at bid or below in securities where there is a bid/ask spread and that's how they make money. If that's, correct ...
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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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Tiny volume trades from market-maker
I am watching DVAX on Level II. For the past year and a half, I've seen trades executed with normal volume (100, 200, 1500 shares). However, as of the new year, I've started seeing trading done in ...
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Does each stock have its own designated market maker?
From Wikipedia:
In the United States, the New York Stock Exchange (NYSE) and American Stock Exchange (AMEX), among others, have Designated Market Makers, formerly known as "specialists", ...
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What is the role of a market-maker?
I am trying to understand the role of a market-maker. So, the best bid and offer depend on where orders are resting, and these orders are from retail investors or institutions or whoever. Why is it ...
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Who provides liquidity if there's no market-maker?
The market-maker provides market liquidity and gives bid/ask price of one unique equity. Then what will happen to an equity in an exchange which has only one market-maker when that market-maker goes ...
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Does a market-maker make any money in a liquid asset with tight bid-ask spread?
In a liquid asset like SPY, is there any market-maker making markets? It seems that with such tight spreads, there is no incentive for the market-maker to operate in this underlying. But then, again, ...
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Market-maker's *ask* below current *bid*
I am reviewing some market-maker raw data and sometimes I see the following happening. The market-maker quotes an ask price that is below the current bid price (of let's say, the market itself). How ...
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Origin of a market-maker's inventory
Could you please explain in the context of the OTCBB exchange
Q) little known company goes public on the OTC with 40 shareholders whose securities have been registered assuming none of this base of ...
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Do market-makers always quote a bid and ask simultaneously?
I am trying to understand some market-maker (MM) data that I have. As a follow-up to a question I read about MM and to this piece of information on Investopedia,
Market makers must maintain ...
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Do I pay bid-ask spread if I trade on the NYSE?
From what I understand from this market-maker versus specialist discussion on Investopedia, the job of the specialist is to bring buyers and sellers together as opposed to a market-maker who buys from ...
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If the spread goes to the market-maker, is the market-maker the exchange?
I understand that the bid-ask spread is the difference between the price a buyer is willing to pay and the price a seller is willing to take for an asset. I also understand that this difference goes ...
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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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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 ...
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How does a dealer (or market maker) earn the bid-ask spread on a stock?
If I am correct, dealers purchase assets for their own accounts, and
later sell them for a profit from their inventory. But the
spreads is the difference between buy (or "bid") prices and sell (or
"...
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