Offering the right prices, all the time
When an investor either sells to, or buys from, a market maker, it means the market maker takes a position; this immediately creates the risk that the price moves against them, which could result in a loss on the transaction. Market makers aim to manage this risk by trading very quickly on the opposite side, capturing what’s known as the “bid and ask spread” as their compensation, but mostly need to hedge their position to offset their risk with a different product.
Being quick enough to provide this service and, at the same time, benefit from the (albeit tiny) spread is where we largely earn our keep. But it’s a narrow margin business, which means we need to be constantly on our toes, offering the right prices across many markets and products, and all at the same time.
