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A market maker is a kind of "middleman" in the financial markets, and their main job is to ensure that there are enough buyers and sellers in the market to make transactions smoother. Think of them as vendors in a fruit market, always ready to buy and sell and won't leave you empty-handed.
📍 Specifically, market makers have the following roles:
1️⃣ Provide liquidity: Market makers are always quoting buy and sell prices so that you can buy or sell securities at any time, just as you can buy apples in the market at any time.
2️⃣ Narrow the bid-ask spread: They compete to make the gap between the buying price and the selling price smaller, similar to making the price of fruit more reasonable, so that you can buy something at a lower cost.
3️⃣ Stabilize the market: When the market is volatile, market makers will help the market to restore balance and prevent excessive price volatility by adjusting prices and trading volumes, just like a hawker keeps prices stable when fruit prices fluctuate and avoids market chaos.
A market maker is a kind of "middleman" in the financial markets, and their main job is to ensure that there are enough buyers and sellers in the market to make transactions smoother. Think of them as vendors in a fruit market, always ready to buy and sell and won't leave you empty-handed.
📍 Specifically, market makers have the following roles:
1️⃣ Provide liquidity: Market makers are always quoting buy and sell prices so that you can buy or sell securities at any time, just as you can buy apples in the market at any time.
2️⃣ Narrow the bid-ask spread: They compete to make the gap between the buying price and the selling price smaller, similar to making the price of fruit more reasonable, so that you can buy something at a lower cost.
3️⃣ Stabilize the market: When the market is volatile, market makers will help the market to restore balance and prevent excessive price volatility by adjusting prices and trading volumes, just like a hawker keeps prices stable when fruit prices fluctuate and avoids market chaos.
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