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A market maker brings continueous liquidity to the trading market of a particular stock by standing ready to buy or sell shares any time markets are open at any publicly quoted price. To qualify as a market maker, a brokerage firm is required to buy or sell shares regardless of whether or not it has customer orders. If there are no customer orders, the shares become part of the market maker's stock inventory. NASDAQ and OTC stocks rely exclusively on the market maker system to create an orderly trading market for their shares. Most NASDAQ companies have more than one market maker. The market maker reduces risk associated with price fluctations by maintaining a bid-ask spread on each stock it covers. The difference between the ask and bid price is profit the market maker pockets as compensation for risk. |
