Trading, Accounts & Prohibited ActsQuestion 187 of 398
What is the primary function of a market maker in the secondary market?
a.To provide liquidity by continuously quoting both bid and ask prices and standing ready to buy or sell
b.To audit the financial statements of issuers
c.To set the interest rate policy of the Federal Reserve
d.To approve securities for registration with the SEC
Explanation
A market maker (a dealer) commits capital to continuously quote firm bid and ask prices, standing ready to buy at the bid and sell at the ask. This adds liquidity and helps ensure that investors can trade even when there is no immediate counterparty.
Law Reference: Securities Exchange Act of 1934Practice all 398 questions free — no signup required.
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