The concept of 'Market Making' & 'Market Maker' in Stock Market !

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'Market Making' & 'Market Maker'

  • Suppose one buyer is willing to buy a specific stock but there is no seller to complete his order. The reverse case may also occur in Stock Market.
  • To sort out this real life situation, the concept of 'Market Making and Maket Maker' was introduced by SEBI (Securities and Exchange Board of India) in indian Stock Market.
  •  Market Maker is typically an institution which is appointed by Stock Exchange to increase and meet demand-supply of shares in Stock Market.
  • The Market Maker places buy-and-sell call at the same time for a specific time period for a guaranteed number of shares. 
  • So, 'buy / sell' requirement of investor/trader is fulfilled by Market Maker's own holding or inventory of stocks.
  • The Market Maker books profit by the difference between buy-call and sell-call placed by him. 
  • Suppose the Market Maker places a quote of Rs.500-450, which means that the Market Maker will buy stock at Rs.450/- and sell it at Rs.500/- and consequently, the Market Maker will earn a profit of =500 - 450 = Rs.50/-.

Example of Market Makers in Indian Stock Exchange : 
  • IDBI Capital Markets & Securities Ltd.
  • Karvy Stock Broking Ltd.
  • Quantum Global Securities Ltd.
  • Etc............


Happy Investing !!!
প্রদীপ
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