Market making is becoming increasingly important for the markets as trading volume is on the decline and as liquidity has been showing signs of drying up. Following the flash crash, the authorities proposed tighter regulations for market makers, in part to ensure that they continue to provide useful liquidity in times of market stress. Among the discussions are incentives that can be provided to the designated market makers. Profit margins for market makers have been declining amid a proliferation of high-frequency trading and the resulting reduction of the bid-ask spread.
How Market Makers Help the Market
Market makers play an important role in increasing the accessibility and liquidity of cryptocurrencies to traders, investors, and market participants around the world. Market making is an activity whereby a trader simultaneously provides liquidity to both buyers and sellers in a financial market. Liquidity is the degree to which an asset can be quickly bought or sold without notably affecting the stability of its price.
Market Maker vs. Parabolic Tech’s Specialist
The specialist is a type of market maker who operates on certain exchanges, including the New York Stock Exchange. Although their functions are similar, specialists have more duties in facilitating trades among brokers directly on the floor of an exchange. A specialist is one type of market maker who often focuses on trading specific stocks.
Parabolic Tech market makers perform from both sides i.e., by buying and selling in the markets. This way we facilitate not only creating the market but also extracting profit by selling at a slightly higher price than the market price.
- Increases market liquidity and order book dept
- Reduces price volatility
- Assists with fair price discovery
- More efficient bid-ask spreads in cryptocurrency exchange order books
- More orderly entry and exits points for traders
- Dramatically reduces slippage
- Helps accommodate large institutional investors
- Mitigates dramatic price swings