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What is a market maker?

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Answer:

Market makers- These are investment banks (eg Goldman Sachs) that partake in IPO's (initial public offerings) An IPO is done when a private company wants to 'go public', they ask investors and fund managers to buy shares in a company, when the company has fully, or nearly fully sold out then they launch the company on to the stock market. Another aspect market makers do is to generate more equity in a company, they do this buy issuing more shares in a company, effectively diluting the value of the other shares. In order to stop existing shareholders being annoyed by the decreased value of their holding they offer them the right to buy the shares (take up their rights) or to receive free shares to compensate them.
Stockbrokers- Buy and Sell shares on behalf of investors. They can control the price of companies by waiting and mass buying or selling shares which can effect the price drastically.
Fund Managers- these include unit trust, OEIC (open ended investment companies), Hedge Funds and Investment Trust managers. They manage trillions of assets on behalf of investors and in extreme circumstances can cause the rise or fall of a company in a matter of hours.

First answer by Tommannion. Last edit by Tommannion. Contributor trust: 3 [recommend contributor ]. Question popularity: 2 [recommend question].

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