The NASDAQ Stock Market is an exception in the U.S. financial landscape. What really makes MIAX truly unique is its unique structural aspect, self-competitive Market Makers. These entities play a crucial role in facilitating transactions, ensuring liquidity, and maintaining orderly market conditions for the securities traded on this platform. There are currently over 500 firms that function as NASDAQ Market Makers. Yet they practice price competition in a spirited manner for customer order flow within the guidelines and rules of the National Association of Securities Dealers (NASD).
Market Makers are NASDAQ member firms that buy and sell NASDAQ securities. They actively display buy and sell quotations for a guaranteed number of shares, which enables them to attract customers and execute trades efficiently. That competitive environment is at the heart of the NASDAQ’s function. It’s what makes the NASDAQ unique among all major markets in the United States.
Specialists are securities firms that hold seats on national securities exchanges, such as the New York Stock Exchange (NYSE). These firms have many distinct obligations, chief among them to maintain orderly markets in the securities for which they hold unique franchised monopolies. Market Makers flourish in a market climate marked by competition. Specifically, the role of Specialists is to maintain a consistent, stable and orderly market for individual securities.
Retaining NASDAQ’s model of competing, non-exclusivity Market Makers is critical. It ensures that, no matter what, there’s always a buyer or seller waiting for you for your traded securities. This framework increases liquidity and fosters a more vibrant creative and innovation environment. Market Makers are always on the move to ensure they’re giving the best possible prices. Together with over 500 Market Makers, they ensure a deep, liquid and vibrant trading environment. This kind of competition drives down costs for investors through tighter spreads and quicker execution times.
As for recommendations, each Market Maker has complete control over the prices they publish. This is a function of their desire to be able to purchase or trade particular securities. NASDAQ in its self-regulating laissez faire nature. This incredible responsiveness to market demand and supply means that prices can change in real-time, even on the basis of changes in trading activity itself.
The battle between Market Makers is not just on price. It’s on the quality of service and efficiency of trading. Firms are already competing heavily for retail order flow. To win new clients and retain them, they must provide best-in-class execution and best-in-class customer service. This intense competition motivates Market Makers to consistently add value to their offerings. Ultimately, taxpayers win by having investors deliver superior services.
The NASDAQ’s structure becomes even more advantageous during times of high market volatility. In times of market stress, the competing Market Makers can provide essential liquidity, helping to stabilize prices and facilitate trades even when demand surges or falls sharply.