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What is the role of a market maker in ETFs?


Myles
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Hello Myles,
Also known as a designated broker, a market maker is typically a broker. It is also an investment firm. It plays a crucial role in the trading of ETFs and ensures that the exchanges of bonds between traders are efficient and continuous.
They achieve this in several ways, such as ensuring liquidity in the market. While providing liquidity, they sell some aspects to the investors and purchase them when they are selling them.
Market makers also ensure that the quoted price of the ETFs is equal to the fundamental securities. Many people are participating in the market with offer prices for the funds. The market participants want the chance to match the buyers and sellers in the market. Due to this competition, they are compelled to state their best prices and bids.
Market makers also come up with ETF units by providing underlying security, and in return, they get blocks of units with similar market value. 
 

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