Market makers

Markets only work well if there is a decent number of buyers and sellers, so that deals can get done. Otherwise, they become ‘illiquid’. Enter market makers. In the equity market these are specialist members of the London Stock Exchange – typically banks and brokers – who commit to trade shares and bonds, often in larger quantities than most other investors.

They are particularly useful in relatively illiquid markets for, say, smaller stocks, where dealing can be difficult. But be warned: each market maker sets its own buying and selling (bid and offer) prices and the gap (or spread) can be wide when few market makers compete to trade a security.

So the more market makers there are, the better, as it increases competition and keeps prices keener.

• See Tim Bennett’s video tutorial: What are market makers?

MoneyWeek magazine

Latest issue:

Magazine cover
Avoid the dinosaurs

Why smaller stocks are better bets

The UK's best-selling financial magazine. Take a FREE trial today.
Claim 4 FREE Issues

Vote in the MoneyWeek Readers' Choice Awards

Vote for your favourite financial services company in the inaugural MoneyWeek Awards, and you could win a year's subscription to MoneyWeek magazine. Find out more and vote here.


Shale gas 'fracking' promises to transform Britain's energy market. Find out what it is, what it means, and how to invest.

Which investment platform?

When it comes to buying shares and funds, there are several investment platforms and brokers to choose from. They all offer various fee structures to suit individual investing habits.
Find out which one is best for you.