Understanding the Role of Market Makers in Equity Markets

Easy Equity Market Structure Market Microstructure

In the context of equity market microstructure, understanding the mechanisms and behaviors surrounding buy and sell orders is crucial. One such concept is the role of market makers in providing liquidity. Market makers are firms that stand ready to buy and sell stocks at publicly quoted prices.

Which of the following best describes the role of market makers in the equity market?

Market makers primarily facilitate transactions by matching buy and sell orders directly without any inventory risk.

Market makers provide liquidity to the market by posting bid and ask prices, thus assuming inventory risk.

Market makers engage solely in high-frequency trading to capitalize on small price fluctuations.

Hint

Submitted6.8K

Correct6.5K

% Correct95%