A market maker is usually referred to as an exchange sub-firm or say, a member firm which is stamped with the duties to manage and retain the liquidity of a specific instrumental tool and that too for a period depending on the status of Crypto CFD Trader review of quoting bid and sell orders.
Mostly, the type of financial instrument for which a member firm performs market making activities include shares, ETFs, and other structured products.
Organizational strategies of the sub-firm that uplift MMs performance include
- The member firm must ensure that none of the MM activities mingles with the regular trading errands.
- It should establish some effective criteria for preventing and controlling the information exchange or else, it can result in market abuse and thereby affecting the performance of MMs works.
- Moreover, they must clearly avoid any situations of conflict which has the tendency to harm the client interest and hence resulting in a low working activity.
- Further, they want to keep the record of orders and transactions held till date, in accordance with the rules and regulations of Exchange documents.
The element firm needs to send its members for Exchange employee training in relation to MM facility which includes lectures. Additionally, as qualified personnel, you need to satisfy the following requirements for the success of MM
- Can perform the activities of a valid broker or investment advisor
- Productively complete all the pieces of training organized under Exchange
In addition to all these, some technical requirements are needed to be met for increasing the MM skill and includes
- Usage of advanced application software
- Perform tasks only via automatic order
How to apply for MM activity?
The sub-firm can apply via two methods
- TWS or Trader Workstation interface: Here they have to carry out a simulation practice in the testing environment.
- New or Updated User application: Proceed in accordance with IT sector of brokerage firms.
If the Exchange approves the application, it is further guided to the grant MM status where
- Data on the consecutive instrument are evaluated
- The required date on which the member firm anticipate starting working is also noted down
- And finally, the statement of the firm regarding the previous
information is also validated
Further, the division firm should attach the application for opening and closing of a user account with respect to its employee and must specify the users’ role and the instrument with which he is efficient with market maker trading.