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Market Makers

Comments

  • #2
    Noel 006
    Closed Accounts Posts: 29 ✭Noel 006


    Huge Control, but thats not necessarily a bad thing! IMHO! Depends on the market, if its a Forex market where a bank may be a market maker then watch out, if its a futures market where the exchange is the market maker then thats what provides the liquidity which keeps spreads tight and that is good for us traders! These exchanges are highly regulated and make billions through exchange fees so don't need to act the tramp by screwing us!


  • #3
    woodseb
    Registered Users, Registered Users 2 Posts: 876 ✭✭✭woodseb


    Noel 006 wrote: »
    Huge Control, but thats not necessarily a bad thing! IMHO! Depends on the market, if its a Forex market where a bank may be a market maker then watch out, if its a futures market where the exchange is the market maker then thats what provides the liquidity which keeps spreads tight and that is good for us traders! These exchanges are highly regulated and make billions through exchange fees so don't need to act the tramp by screwing us!

    when do exchanges act as MMs?


  • #4
    Noel 006
    Closed Accounts Posts: 29 ✭Noel 006


    As far as I know, an exchange will generally act as a market maker, or allow other market makers to operate within strict guidelines, to increase liquidity in markets. If a new product is being launched by an exchange they will take the other sides of trades to increase volume, therefore liquidity and entice more traders to enter the market until volume is at a level that they don't need market makers anymore. It's a bit of a chicken and egg situation, nobody wants to trade illiquid markets but you need traders to create liquidity, so as traders won't go in first the exchange or its chosen market makers will. I am open to correction on this but I am pretty certain that this is generally how it works.


  • #5
    woodseb
    Registered Users, Registered Users 2 Posts: 876 ✭✭✭woodseb


    i think it is very rare for an exchange to act as a market maker, if they want to launch new product they offer incentives such as fee rebates to firms to act as market makers in order to create liquidity. an exchange would not have the resources or skill to market make


  • #6
    daveirl
    Closed Accounts Posts: 14,483 ✭✭✭✭daveirl


    This post has been deleted.


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