Market Making Activities
Chapters in this video
What this video covers
- Why a designated market maker (DMM) must always provide continuous two-sided quotes (both bid and ask), and why a one-sided quote violates exchange rules
- How market-wide circuit breakers halt trading at 7%, 13%, and 20% declines in the S&P 500, and why the 20% level three halt differs from levels one and two on timing
- What distinguishes a firm quote (legally binding obligation) from a subject quote (requires confirmation), and why nominal quotes carry zero obligation
- When a market maker uses bid wanted (BW) versus offer wanted (OW) to solicit interest from other dealers
- How principal transactions earn markup or markdown from the firm's inventory, while agency transactions earn commission for routing customer orders
- Why a firm cannot act as both principal and agent in the same transaction, and how capacity must be disclosed on the customer confirmation
- How SEC order handling rules force market makers to display customer limit orders that narrow the spread, and where over-the-counter (OTC) trades in National Market System (NMS) stocks get reported
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