The owner and president of KNC Ticker Group, Inc., Ricardo Mashregi spent several years as a market maker for such firms as Merrill Lynch Canada and Desjardins Securities Inc.
In most stock markets, individual investors assume that on any given day they can either buy or sell any listed security. When a buyer enters a bid, as soon as it is matched to a seller’s offer price, a deal is struck. With the vast quantities of equities transactions being executed daily, it is easy to take for granted the idea that the number of shares purchased will equal the number offered for sale. This is not the case, however. There always exist imbalances between shares offered for sale and purchase bids. These imbalances are addressed by market makers.
A market maker is a company or individual who maintains an inventory of a specific security or securities and quotes both a purchase and sale price for those issues. When there is an imbalance in the market, such as an offer to sell unmatched by an offer to buy, the market maker will purchase the securities if the seller’s asking price matches the market maker’s purchase price. On the digital trading floor, the decision to send an unmatched trade to a market maker can take mere seconds. The market maker promotes market stability and investor confidence, both of which would be severely undermined if investors, once they made the decision to buy or sell a stock, could not find a matching buy or sell offer.
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