G EXPLORE MARKET MAKING • EXPLORE
RE MARKET MAKING • EXPLORE MAKET MA
What we do
Market makers are mathematicians, technologists, data scientists, operations experts and researchers who harness the latest trading technologies to serve a unique role in European financial markets.
Market makers commit to being actively present in the markets at all times, supporting investors by ensuring they can buy or sell instantaneously, at the best prices and with the lowest costs.
By offering investors this certainty around their transactions, we help to create confidence within the financial markets as a whole, helping to make them more resilient.
While our ongoing investment in cutting-edge technology ensures that we remain competitive, and it also has positive knock-on effects for capital markets and far beyond.
You might not know we are there, but market makers are always present in capital markets benefiting everyone from pensioners and families to companies, institutions and governments.
How we do it
Always present to support investors
Market makers literally help to ‘make markets’ by stepping forward to meet supply and demand needs in stocks, bonds, ETFs, futures or options. We are intermediaries who are always there to enable investors to buy or sell at market prices.
What is the market price?
On any exchange-traded market, the “bid” is the highest price a buyer is willing to pay, and the “ask” or “offer” price is the lowest price at which a seller is willing to sell, at any given point in time. The difference between the two is called the “bid and ask spread.” When the spread is too wide, liquidity is low and volatility is high. Market makers work to ensure spreads remain tight by posting the best prices on both the bid and ask and constantly replenishing those prices throughout the day.
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.
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.
Investing in cutting edge technology
So how do we stay alert and active? In today’s highly competitive electronic markets, market making is a form of algorithmic or automated trading that takes place at a rate of action of which only computers are capable. To continuously provide competitive quotes in multiple products on multiple exchanges, we connect many computers running trading algorithms to the exchange. We analyse huge amounts of data to quote the best prices, while at the same time effectively managing our associated risks.
The fact that we only ever trade with our own capital makes us faster to seize technological and trading opportunities than traditional financial services firms. And this, in turn, creates healthier and ultimately more innovative financial markets that benefit everyone.
Competition and reach
Market makers unlock and facilitate greater choice for investors, leading to better prices, lower costs and better value.
Transparency and fairness
Prices are driven by competition amongst each other and wider market participants, leading to a virtuous circle of greater efficiency and lower cost.
Agility and innovation
Through electronic trading and constant innovation, market makers bring benefits for all, leading to more accessible and democratic markets.
Liquidity
A diverse community of highly-focused market makers, and their continual presence, contributes to strong, competitive and resilient markets.
Risk management
Market makers trade only their own capital so risk management is a real priority.
This minimises potential conflicts of interest and drives a focus on creating liquid markets while applying strong risk management.
Our Impact
Enabling economies to grow and flourish
By supporting active and liquid capital markets, market makers help governments and economies to grow and …
Enabling economies to grow and flourish
By supporting active and liquid capital markets, market makers help governments and economies to grow and flourish.
In the UK, market makers are helping to create one of the world’s most attractive places to raise money; supporting a world-leading financial sector.
In the EU, we are enabling the growth of pan-European capital markets and financial markets, helping to create cohesion and foster a strong EU economy.
Across the EU and UK, market makers help to facilitate trading in public debt by quoting prices in government bonds, which boosts global market competitiveness.
Supporting the green recovery & transition
Market makers are committed to facilitating climate action under the European Green Deal and the UK Green Finance…
Supporting the green recovery & transition
Market makers are committed to facilitating climate action under the European Green Deal and the UK Green Finance Strategy.
First, we support exchanges and issuers to design and launch new sustainable investment products.
Then we provide valuable liquidity in these innovative green financial products to help to foster their growth.
This actively enables the development of sustainable finance, supporting the green transition and post-Covid recovery.
Contributing to strong international financial systems
As a key player in trading markets (known as secondary markets), market makers are…
Contributing to strong international financial systems
As a key player in trading markets (known as secondary markets), market makers are fundamental to the fabric of financial markets.
Their presence helps to create fair, orderly, open and resilient financial markets, which underpin strong economic growth.
Unlike traditional financial institutions, market makers are typically lean, entrepreneurial firms able to make and execute decisions quickly. This means we can get things done.
Our thought leadership and technological innovations have helped to create the most efficient, democratic and fair markets in global history.
Creating certainty for institutional and retail investors
Market makers give investors the power to trade as soon as they want to, and this…
Creating certainty for institutional and retail investors
Market makers give investors the power to trade as soon as they want to, and this all-important certainty helps to keep the markets moving.
Market makers help investment managers to do their job better: adjust their portfolios, pursue their trading and investment strategies and manage their risk, all with the lowest cost possible for their underlying clients.
Market makers also empower smaller asset managers to trade directly on public markets, rather than relying on relationships with banks to work their orders.
Making a market environment where businesses can grow
Market makers bridge primary and secondary financial markets …
Making a market environment where businesses can grow
Market makers support companies after IPOs by facilitating continuous trading in their shares. When investors can trade these shares readily, it can help give companies continued access to the capital they need to grow.
By always posting the best bid and ask prices, they help to keep share prices stable. Without market makers, markets would be much more likely to spike and dip unpredictably, creating a really challenging environment for investors.
By ensuring the trading environment for shares post-IPO remains healthy, we help businesses to raise the money they need, when they need it – quickly and without excess cost.
By ensuring the trading environment for shares post-IPO remains healthy, we help businesses to raise the money they need, when they need it – quickly and without excess cost.
