Designated Market Maker and a Maker Maker?

What is the difference between a Designated Market Maker and a Maker Maker?

Are either a DMM and a MM involved in the negotiated market?

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Hi @Provincial_amethyst - great questions.

Market makers are institutions that primarily buy and sell securities with the public. Think of them as car dealerships, but for securities (e.g., stocks and bonds). They buy securities from investors and place them into their inventory, then sell those same securities back to other investors. They are paid the spread for their duties, which is the difference between their purchase price and sale price. For example, a market maker buys a stock from one investor at $20/share, then sells the same stock to another investor at $21/share. They earn a $1 spread per share in this scenario. The more shares sold, the more they make.

The Designated Market Maker (DMM), sometimes known as the “Specialist,” is a specific market maker on the New York Stock Exchange (NYSE). While they operate as a general market maker, there are some unique aspects to their role. Not sure if you’re looking to go “in the weeds,” but follow the previous link to learn more about the details. Also, here’s a link to an NYSE YouTube video describing the DMM a bit further.

Market makers operate in negotiated markets (NASDAQ and the OTC markets) while the DMM operates in an auction market.

I’m happy to go into further detail - just let me know what you want to explore.