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Investment Dictionary


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Market Making

 

Market making is a service provided by brokerage company to some listed company to increase liquidity in stock trading on stock exchange. Usually brokerage company gets paid for this service and has to maintain some spread between demand and supply on stock market. 

 

To provide market making brokerage company has to acquire some stocks on its own account and keep the balance by giving direct orders to the exchange according to transactions of other market participants. This service may increase trading activity in particular stock and is useful for the company if free float is too small to be liquidity naturally high enough.

 

 






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