What is a marketer called?
A market maker or market maker refers to individuals or companies that control the supply and demand of a market by owning and using a portion of a company’s securities. In fact, market makers are individuals or companies that buy securities and commodities for profit.
Through the activity of market makers, the formation of buying and selling ranks is prevented and liquidity in the stock market is controlled, thus preventing the formation of sharp fluctuations in the price of each share.
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Suppose the situation in the economy develops in such a way that we see the formation of long sales queues and a sharp decline in the price of each share; In this situation, the market maker takes action and buys the shares that are registered for sale, thus preventing a sharp drop in prices.
What is the duty of market makers in a situation where the market trend is positive and buying queues are formed in the stock market?
When the market is green for a long time, the willingness of shareholders to sell stocks decreases, market makers use their stocks to balance the market, thus preventing the formation of a buying queue, and They fill the base volume.
Are you familiar with the duties of stock market traders?
- Maintain liquidity in the market
- Control the range of price fluctuations in the market through stock trading
- Avoid sharp price fluctuations in the market by controlling stock prices
- Increasing the likelihood of more liquidity in the market
- Reduce transaction costs
Therefore, we can summarize the activities of market makers in the following sentence:
“It is an activity that is done with the aim of making a profit and to achieve this goal, financial assets (securities) are traded (bought and sold). In this way, unwanted fluctuations in asset prices are reduced and transactions are facilitated. ”
Do you know how marketers facilitate trading?
Given the roles that market makers play in the market, it can be said that by providing supply and demand in the stock market, they cause stocks to be transferred between buyers and sellers. To achieve this, they must move in the opposite direction of ordinary investors.
In this way, when shareholders decide to sell their shares and sales queues are formed, market makers act as buyers and help the process of converting stocks into cash in the market. But if shareholders decide to buy a company because of a news release or information about the value of a company’s stock and form buying queues, marketers act as sellers and continue to do so until the price reaches a relative equilibrium. they give.
Do you know what factors affect marketing?
Among the factors affecting marketing are divided into the following 3 sections:
- Market depth
- Market width
- Ratio of information-oriented investors to cash-strapped investors
1- Market depth
From an economic point of view, if the supply and demand curves are elastic and continuous around the value of the financial market assets, it means that the market under study is deep. In other words, if the sending of buy and sell orders at prices higher or lower than the equilibrium price by investors is ongoing, it indicates the depth of the market.
2- Market width
When the number of buyers and sellers in the equilibrium price, which indicates the intrinsic value of the share, is high, it indicates the extent of market width. In fact, the presence of a steady flow in stock trading determines the width of the market.
A market with such a feature has a high liquidity, and for this reason, market makers are very willing to operate in these markets, even with low profits.
3- The ratio of information-oriented investors to cash investors
As the title suggests, investors can be divided into two categories: information-oriented and cash-strapped.
The key question is how do each of these groups invest in the financial markets and what impact will they have on the market?
Cash investors increase liquidity by bringing their excess capital into the market. But information-oriented investors evaluate securities and trade based on information they get from a particular stock.
Due to the fact that sometimes incorrect information may be provided to investors, unbalanced orders in the market increase and this imbalance in the market increases the need for marketers to work, which leads to more profit for them.
Do you know how marketers profit?
Given the explanations given above regarding the nature of the market makers’ activity, it is quite clear that this activity is associated with high risk.
Marketing activity is doomed to high risk in transactions because it is associated with the commitment to buy and sell stocks and hold assets. In fact, market makers run the risk of depreciating securities after any stock trading.
In such a situation, what causes market makers to continue their activities in the market?
It is true that after each trade by marketers there is a risk of depreciation of assets, but due to the fact that the number of trades they make each day is very large, so expect a high daily profit for them. Likewise, in the case of asset maintenance, all market makers receive a profit and a wage.
Marketers in the Tehran Stock Exchange, by concluding a contract, receive a certain fee for their activities.
What are the benefits of the stock market for marketers?
The Stock Exchange Organization has issued two single articles to support market makers, which are as follows:
- According to Article 18 of the Exchange Trading Instructions, “The Tehran Stock Exchange and Securities Organization will provide a separate trading station for the trading of each security, without receiving any cost in this regard. It is not allowed to trade other securities from a special trading station. ”
At first glance, Article 18 may seem a little complicated. To better understand this point, you need to know the “meaning of the trading station” . So be with us:
The trading station is in fact the same portal for registering orders and transactions, which is directly connected to the core of trading, and the stock exchange organization, by providing a trading station to market makers, allows them to place orders in only one symbol.
- According to Article 19 of the Exchange Trading Instructions, “The exchange fee ceiling of market transactions is 10% of the exchange fee ceiling of ordinary transactions. The stock exchange may set its commission on market transactions below the ceiling stipulated in this article. ”
According to this article, the stock exchange and securities organization must receive a fee of up to 10% or less from market makers.
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