Responsiblities of the market makers

Sammy Chua explains the responsiblities of market makers in an easy understandable way.Now we will have an idea of the market makers job

1 .Execute transactions for their clients. The most important
function is to execute orders for clients at the best
possible price. They do this by interacting with other market
makers online or by telephone.

2 Keep an orderly market. This means they must prevent
dramatic fluctuations in the price of a stock that comes
under heavy buying or selling pressure. To create this liquidity,
market makers must provide a two-sided market
within the market bid/ask price. Liquidity happens as
market makers fulfill their obligation to make markets
throughout the trading day. They must advertise to sell at a
certain price whenever they make a bid to buy a stock at
a certain price. That’s why it’s called a two-sided market.

3 Trade for the firm’s proprietary account. Market makers
use inside knowledge, experience, and technology to
make profits on a daily basis. They take profits on the
stocks they make a market in, but they also take speculative
positions on the possibility of future price movements
of those stocks—depending on the time of day, the market
conditions, and the existing order flow.


Sammy Chua is the author of the book : Day trade your way to financial freedom