Most foreign exchange trading firms are market makers and so are many banks. The market maker both sells to and market maker manipulation forex peace buys from its clients and is compensated by means of price differentials for the service of providing liquidity, reducing transaction costs and facilitating trade. Market makers that stand ready to buy and sell stocks listed on an exchange, such as the New York Stock Exchange or the London Stock Exchange, are called “third market makers. Designated Market Makers, formerly known as “specialists”, who act as the official market maker for a given security.
NASDAQ Stock Exchange, employ several competing official market makers in a security. These market makers are required to maintain two-sided markets during exchange hours and are obligated to buy and sell at their displayed bids and offers. As of October 2008 there were over two thousand market makers in the USA and over a hundred in Canada. A prediction market, or market explicitly designed to uncover the value of an asset, relies heavily on continual price discovery holding true. Examples of New York market makers are Virtu Financial, Jane Street Capital, and Optiver.
Some of the LSE’s member firms take on the obligation of always making a two-way price in each of the stocks in which they make markets. Proponents of the official market making system claim market makers add to the liquidity and depth of the market by taking a short or long position for a time, thus assuming some risk in return for the chance of a small profit. In contrast, on smaller, order-driven markets such as the JSE Securities Exchange it can be difficult to determine the buying and selling prices of even a small block of stocks that lack a clear and immediate market value because there are often no buyers or sellers on the order board. Unofficial market makers are free to operate on order driven markets or, indeed, on the LSE.