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"I am conjecturing that there are minimal benefits to an exchange to having more than one Market maker at a given stock within a given price range." Could you
by Ntrails 14y ago
"I am conjecturing that there are minimal benefits to an exchange to having more than one Market maker at a given stock within a given price range."
Could you perhaps explain the downside of having multiple market makers per stock? It seems trivial to state that competition in providing liquidity alters the cost of said liquidity and disprove your contention - but why bother to make that argument when there can't really be additional costs by multiple parties competing to offer a service?
- lifeisstillgood 14y agoWith zero Market makers, the exchange cannot guarantee I can walk in and sell at a reasonable price in a reasonable time. With one Market maker the exchange can do so and so it benefits from being a effective place to trade - this is a huge advantage over any other exchange With a second Market maker, the exchnage gain is I believe orders of magnitude lower. Almost any Market maker is forced to maintain sensible spreads (else it is worth trading without them) so just one Market maker will offer expensive but not outrageous spreads. A second one brings only the benefit of slightly cheaper, which coma red to the benefits from the first are negligible