What defines a "Market Maker"
yspsales
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A answer to one of my posts in another thread got me thinking.
What (or who) is a market maker?
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One who makes the market
Someone who builds excitement and attract attentions to a genre. Attention = market activity
You would be surprised by simple things such as simply talking about stuff here equals sales on eBay. Some people exploit/capitalize on this effect.
But it cuts both ways, sometimes genuine excitement results in unintentional competition. Whales often keep their interests secret until a point
11.5$ Southern Dollars, The little “Big Easy” set
https://en.wikipedia.org/wiki/Market_maker
I was going to contrast it with "promoters" but assumed they were one in the same. Thank you for the reply.
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Can happen in coins or stocks or anything that is bought and sold. An entity buys up a lot of one thing on the sly and on the cheap. Then when they think they have enough to make a bundle they create an artificial hyping of the coin. Maybe a news item or some such where the word gets out to the collectors that this is a hot item. At that point they have generated a false buying based on their hype (might be real might not be). Then they unload for a nice profit all the "coins" they bought earlier. They made a market for them making themselves a tidy profit.
We see this all the time, especially on new issues as error statehood quarters (that comes to mind). The market shoots through the roof as the hype is believed and then when it's all over an done the prices fall back to where they started (or close to it).
So, you saw the hype and bought into it and now you are happy as a clam. Until the tide goes out and leaves you stranded with a coin you will probably never recoup you cost on....
Back in the day the Hunt brothers tried to make a market on silver but were unable and went belly up. They did force the price up by their buying activity but did not bail in time and got caught with prices falling like a rock. They just made a market and then didn't realize that the market had topped and kept buying....
Hope that helps a bit.
bob
My first thought was specialty dealers like Weinberg/EOC or Rick Snow.
Where would Nachbar fit?
Less promotional and instead making a sustainable two way market.
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Yes, I have and do make markets on certain items.
Market makers provide liquidity. MM provide a valuable service.
MM know the spread between the bid and the ask on a particular item.
I buy at the bid and sell at the ask (which I "make" or determine). I let everyone else deal in the middle of the spread.
Market makers quote bid/ask prices on a commodity.
Simply dealing doesn't make you a market maker.
Promotion doesn't make you a maker maker.
If you've got an open bid/ask on 1881-S Morgan $s in PCGS plastic, you are a market maker in 1881S Morgans
Respectfully, isn't what you described commonly referred to as "cornering the market".
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I would consider John Albanese at CAC to be a market maker on many series .
I give away money. I collect money.
I don’t love money . I do love the Lord God.
a market maker moves markets. How much depends on the depth of his pockets.
No Way Out: Stimulus and Money Printing Are the Only Path Left
Hunts tried to corner silver to make a market at higher prices, but it's all the same, just different way of saying the same thing. Today when I think of a market maker, I think of the stock market.
bob
My first thought as well.
That may be the way you think of the term, but it is NOT what it means. Market Makers aren't market manipulators. That's not what the term means. Google it.
Somebody cares? Really? IT is what it used to be but times seemed to have changed. You know that happens in life. Things, including definitions, change over time. I don't google, I Webster when I need to do so.
be well, stay safe.
bob
That is never what market maker meant. Market makers have always existed to create tradeable markets.
https://www.merriam-webster.com/dictionary/market maker
in Numismatics, I have always understood it to mean a Dealer who facilitates a two way market in items, buying and selling at prices which are offered on some type exchange.
I wouldn’t consider Nachbar to be a market maker. An opportunist and promoter of his services, yes, but not a market maker.
I'd agree. Someone like Jack Hunt is a market maker. CAC, really the CDN EXchange part of it, is a market maker as they post bid/ask prices on CAC coins.
disagree, sellers of his certification can be considered market makers if they have a big enough impact on price movement. He is an accessory before the fact, to me no different than a bank that loans a coin buyer millions to purchase a coin at a market moving price. His opinion is a market influencer as is that of PCGS.
No Way Out: Stimulus and Money Printing Are the Only Path Left
I agree with the added nuance of creating a market has a two-way effect. Promotion helps to sell. A market maker helps the buy side too
11.5$ Southern Dollars, The little “Big Easy” set
Not quite. Yes, market makers provide liquidity, but so does the local pawn shop. And if your spreads are so wide that everyone else deals in the middle of your spreads, you're more of a retailer than a market maker.
So to answer the question, the key to being a true marketmaker is being highly competitive on both the buy and the sell side. Which means adequate capital, substantial inventory, tight spreads, high visibility, and high volume.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Summary:
Yup, the last 2 posts nailed it.
Some of the "answers" are Way off from how the term is usually used and understood.
Liberty: Parent of Science & Industry
I would define the term as the entity which has the highest bid on a specific item. It is they who define the bid price. "Ask" is just a percentage of "bid".
The highest buyer usually has the best customers but there are other ways they can pay the most.
IIRC, wasn't it because the Gov't changed the rules about owning a certain % of a commodity ?
You are looking at the wrong part of his operation. The CAC stickers aren't the market maker aspect, it is the tens of millions of dollars in posted bids for the CAC coins (especially dollars) that makes him a market-maker in those areas.
Yes. The government actually created the collapse.
And alot of people lost their A**, not just the Hunt brothers
What are CAC prices on a PCGS MS64+ 1934-S Peace Dollar?
Some of the answers to the question posed in this thread were way off base. Those copied below are the ones that seemed to be most accurate.
Market makers quote bid/ask prices on a commodity.
Simply dealing doesn't make you a market maker.
Promotion doesn't make you a maker maker.
If you've got an open bid/ask on 1881-S Morgan $s in PCGS plastic, you are a market maker in 1881S Morgans
I would consider John Albanese at CAC to be a market maker on many series .
in Numismatics, I have always understood it to mean a Dealer who facilitates a two way market in items, buying and selling at prices which are offered on some type exchange.
So to answer the question, the key to being a true marketmaker is being highly competitive on both the buy and the sell side. Which means adequate capital, substantial inventory, tight spreads, high visibility, and high volume.
A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the bid–ask spread, or turn.
In U.S. markets, the U.S. Securities and Exchange Commission defines a "market maker" as a firm that stands ready to buy and sell stock on a regular and continuous basis at a publicly quoted price. A Designated Primary Market Maker (DPM) is a specialized market maker approved by an exchange to guarantee that they will take a position in a particular assigned security, option, or option index.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
@MFeld 's post above nails it from my perspective. What was the context that got you thinking?
Are you asking for JASON quote? Look at greysheet. The prices their typically come off the exchange in actively traded series
There are Market Makers in very thin markets where there is no exchange, quote system, or sheet.
How is this possible? I mean the "very thin markets" part.
The Hunts systematically bought mostly futures contracts from the early 1970's to early 1979. They were following the rules of the paper silver markets. While they accumulated a sizable market percentage, they did nothing to really push the price of silver upwards. In fact the price of silver didn't move all that much from 1973 to early 1979. Gold out-performed silver from 1970-early 1979 and we don't know of any one large gold buyer who was cornering gold during that period. When both gold and silver got crushed from Dec 1974 to August 1976 there wasn't anyone concerned about the Hunts "losses." Silver fell in value by about half.
It wasn't until the Hunts started running into paper contract concerns in spring 1979 that they decided to start shifting more towards physical silver. Maybe they saw the govt interventions that were coming. Their intent was to unload their paper contracts and own the actual metal in-hand. But the SEC and Govt got wise to that and changed the rules on them in January 1980 to "sell only" when it came to silver futures. The Hunts were forced to liquidate. They were never market makers. Just buyers....and then forced sellers. Had they bought only physical silver from the start....they'd have been heroes if they sold out by early 1980.
Warren Buffet from 1994 to 2006 "cornered" a similar physical silver position as the Hunts did - about 120 MILL ounces of the metal.....about $1 BILL at that time. Buffet's actions did modestly push up the price of silver a few dollars per ounce at that time. But he got out in 2006 before the really big push up to $21/oz in 2008. He wasn't a market maker either....nor did he get the Hunt's Govt Treatment. It is surmised that Buffet's holdings were sold into the SLV Silver Fund to get them started in 2006. That gave the bankers a much better foot hold in helping to influence silver prices.
I know what you are referring to except those are technically NOT market makers, as the term is used, because there isn't an actual "market" a that term is used.
I would consider JA a market maker in CAC coins.... He created CAC and will buy/sell CAC coins. Cheers, RickO
Heck I would say JA is a market maker for the Hobby as a whole. He is bigger than just CAC but I agree with your premise
11.5$ Southern Dollars, The little “Big Easy” set
There is a market, it just may be invisible to most.
I know what I do.
On the recent CAC thread jmlanzaf stated... "Making market" just means they buy and sell CAC coins. It does not mean that market consideration goes into the grade verification
It seemed a bit of a paradox at first.
Then I got to specialist dealers.
IHC, Buffs, errors, etc... who have built brands and value.
I intended to include a question about promoters. Guess that line can blur at times.
Always thought some dealers took the Redfield model and just improved the implementation.
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Again, I know what you are referring to but in this context "the stock market" is a market, the buying and selling of specialized items is not "a market" (exchange) open to "market makers".
There is, of course, the more colloquial use of "market" for any kind of retail business which is how you are using the term. An "invisible" market isn't a market in the "exchange" sense. In the colloquial sense, Walmart is a "market" for "True Value" products (their brand). Walmart is not, however, a market maker in "True Value" products even though they are responsible for 100% of the buys and 100% of the sells of "True Value" products; there is no "exchange" for the buying and selling of "True Value" products.
I like being under the radar.
I know for sure that I personally have raised the bid and ask on a few items.
I could care less what your definition is.
It's not MY definition.
There are always Very Special Exceptions to most definitions
A key aspect of how people think of the term is dependable two-way liquidity with relatively narrow spreads. And this is usually assisted and enabled by several, or even better, many, Market Makers competing with each other for trading volume.
Liberty: Parent of Science & Industry
"There is a market, it just may be invisible to most."
Invisible markets? Are they transparent, too?
No, not really.
Indeed. In my definitions a "market maker" is simply the highest bidder and it is the highest bidder that puts a floor under every market. When you advertise to pay bid plus 10% and you honor the bid then you've raised the bid 10%.
I think what some are calling "market makers" are major market players who buy and sell extensively. They do often set the bid price but some of the big guys won't always pay bid. Coins flow to whomever is paying the most even if it's a wholesaler or someone with a closed client list.
Coins are hard for most people to sell so many coins trade at bid.
Quote system is often what the market makers use to make a market.
Not every market maker can have the highest bid (or lowest ask) and failure to have it doesn’t mean they’re not a market maker.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.