Designated market maker
Also known as: DMM
A designated market maker is a firm assigned by the New York to maintain a fair and orderly market in a specific set of listed . Each on the NYSE has one designated market maker responsible for it, and that firm is required to be present at the point of trading, quoting prices on both sides of the market and stepping in to provide when trading gets thin or .
The role combines obligation with opportunity. A designated market maker must maintain reasonable bid and ask prices even during stressful trading, which can mean taking the other side of a trade when few other buyers or sellers are willing to. In exchange for this, the firm earns trading from the spread between the prices it buys and sells at, and from other activity in the it covers.
The role replaced the older system, which performed a similar function on the physical trading floor before electronic trading took over most order matching. Designated market makers still have a physical presence on the NYSE floor today, but their job is now supported heavily by electronic systems, and their core purpose, keeping a 's trading orderly during both calm and markets, has stayed the same.