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Keep in mind that some MMs have contracts with exchanges that require them to always be in the market, and pay them for each share bought/sold. So that MM wil
by wglb 7y ago
Keep in mind that some MMs have contracts with exchanges that require them to always be in the market, and pay them for each share bought/sold.
So that MM will in fact buy orders that may on the face of it be a loss.
- human20190310 7y agoA market maker sets a bid (the price at which they buy) and an offer (the price at which they sell). The offer will always be higher than the bid, and they make the spread between the bid and offer price. If buy and sell orders are roughly balanced, they will not lose money. The idea behind purchasing flow such as Robinhood's is that the traders are random noise traders, with a balance of buys and sells as such.
- wglb 7y agoThere is another kind of market maker whose job is to provide liquidity by always staying in the market. The exchange pays them some fraction of a penny per share bought and sold.