Listing – the primary and secondary market

The role of a Market Maker

The price of stock in a market is determined by the interaction of buyers and sellers – sellers give the price they are willing to sell shares at (Ask price) and buyers state the price they are willing to buy at (Bid price)
Highest Bid Price – Lowest Ask Price = Bid-Ask Spread
When the Bid and Ask prices match, two parties are happy and the transaction takes place. Some major stock exchanges have enough people who want to buy and sell shares at matching prices to keep orders of shares flowing (keep the markets liquid).
What happens when there is little or no liquidity in a market?
When buyers don’t think they can buy or sell in a market when they wish, they often won’t buy at all which is not good for investors!
A Market Maker is a special type of trader - an individual or company that holds large numbers of shares. They offer both bid and ask prices. The Bid-Ask spread they offer gives them a small amount of profit on a single transaction but they deal in large volumes. This in turn provides liquidity in a market

World Stock Markets - Europe

Europe
Most important exchange in Europe
(over 3000 companies listed, with 350 coming from 50 different countries)
Three trading systems used – mainly electronic but one involves the use of Market Makers
A cross-border exchange that operates equity, bond and derivatives markets in Belgium, France, the UK (derivatives only), the Netherlands and Portugal.
Order-driven market - equities and bonds are traded via a harmonised order book - all listed stocks from the five European countries are included on a single trading platform
Main German exchange includes securities and derivatives trading, transaction settlement and the provision of market information
Xetra is the electronic trading system for the cash market, and matches buy and sell orders from licensed traders in a central, fully electronic order book.

World Stock Markets - Asia

Asia
Tokyo Stock Exchange is one of five exchanges in Japan
Uses an electronic, continuous auction trading system – when buy and sell price match, the trade is automatically executed
Deals made direct through buyer and seller – no market makers involved.
Price controls are used on the exchange – prices cannot rise or fall above or below a certain point
‘Circuit breakers’ prevent price swings which can lead to crashes