To earn profits, the market maker must a. bid high, ask low b. equalize...
To earn profits, the market maker must
a. bid high, ask low
b. equalize the bid and ask price
c. not create the market
d. bid low, ask high
Homework Answers
Answer: a. bid high, ask low
Market maker is a participant or member firm in an exchange that buys and sells securities from their own account for their customers. They are called Brokerage Company who does agency trade.
Example: The market maker purchase shares of XYZ for $80 each (the ask price) and then offer to sell them to a buyer at $80.05 (the bid price). The difference between the ask and bid price is only $.05, but by trading millions of shares in a day, he will be able to make profit.
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