What is the primary purpose of market makers in the over-the-counter market?

What is the primary purpose of market makers in the over-the-counter market?

• A. Setting the prices for new stocks
• B. Providing liquidity for buying and selling stock
• C. Establishing trading limits
• D. Issuing new bonds

Answer: (B)

The primary purpose of market makers in the over-the-counter market is to provide liquidity for buying and selling stock. Market makers facilitate trading by being ready to buy and sell shares at any time, thereby ensuring that there is always a market available for securities. This role is crucial because it helps to reduce price volatility and enables investors to execute trades without delay, contributing to the overall efficiency and stability of the market. By holding an inventory of stocks and being willing to trade at publicly quoted prices, market makers enhance the accessibility of securities for investors, which is essential for an active and functioning market.

The primary purpose of market makers in the over-the-counter market is to provide liquidity for buying and selling stock. Market makers facilitate trading by being ready to buy and sell shares at any time, thereby ensuring that there is always a market available for securities. This role is crucial because it helps to reduce price volatility and enables investors to execute trades without delay, contributing to the overall efficiency and stability of the market. By holding an inventory of stocks and being willing to trade at publicly quoted prices, market makers enhance the accessibility of securities for investors, which is essential for an active and functioning market.