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.
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