Who is a market maker?
Маркетмейкер — кто это?
Market maker (market maker) - this concept has several meanings. The most widespread one defines a market maker as a brokerage firm that acquires and stores securities, currency and other assets for the subsequent organization of their sale. In this capacity, market makers act as independent participants in over-the-counter trading, maintaining liquidity. As a rule, a market maker undertakes to sell some minimum of shares for clients.
Another meaning that the concept takes on market maker, is a manager at a stock exchange, whose duties include monitoring the progress of a trading session and informing participants of changes in price, rates, etc.
On an exchange, a market maker usually has a contract under which it undertakes to hold simultaneously placed orders with the spread no more than, again, the agreed upon amount for certain benefits from the exchange.
What functions do market makers perform?
A market maker's job is to:
- Execution of orders of the client of his broker
- Timely provision of quotations to market participants
- Acting as an intermediary between buyers and sellers
The market maker brings the best bids together, resulting in a trade. The bid data is stored in a stack, which can be seen by all participants. He also makes sure that the information arrives in a timely manner to the traders. Different market makers have quotes may vary.
How do market makers work?
The market maker continuously quotes and maintains liquidity. He must execute an incoming order for his own account if there is no opposite order.
In simple words, it looks like this:
Traders analyze the market horizontally. That is, a trader takes some historical data (chart), looks for patterns, draws lines, but does not know what is really happening there, and why the price did not obey our indicator.
In turn, the market maker does not care what MACD says, or what the head-and-shoulders figures started to work out. Moreover, they don't even look at the chart and they don't need volumes, as this is all "past" information.
Market makers analyze the market vertically. They have an order book where all trader's take profits, stop losses and pending orders are displayed. They simply do not need any other information, as they can influence the price movement.
A market maker cannot just take the price and turn it around. But he can push it to the necessary level, bring it to the stop-loss cluster or help to form a figure and then work it out, of course, if it is in his interests. That is, on the one hand the market maker acts against the crowd, and on the other hand he needs another part of this crowd to push the price in the right direction.
List of the largest market makers in the foreign exchange market :
- Deutsche Bank
- UBS
- Citi
- Royal Bank of Scotland
- Barclays Capital
- Bank of America
- HSBC
- Goldman Sachs
- JP Morgan
- Morgan Stanley
If you trade with a Russian brokerage house, then most likely the quotes are provided by one of these marketmakers.