Market makers

Market makers are the larger players that 'make a market' day trading in particular stocks or other securities. Market makers, like other banks and financial institutions, make their money day trading for their clients, and also on their own accounts (i.e. day trading on a giant scale). Market makers have a contractual obligation to take orders for the stocks they make a market in - this is essential to preserve market liquidity. Market makers can process very large orders, although they usually introduce these orders piecemeal into the market in order not to 'tip their hand'. The giant well known firms of Goldman Sachs, Bear Stearns and Morgan Stanley are good examples of day trading market makers. It is probably wise to avoid day trading AGAINST the activities of a market maker in their own specialist stocks, although rumours of illegal activities by consortiums of market makers are fortunately wildly overstated.