Investor to Investor Online Stock-Trading Platform Makes Sense AND Cuts OUT the Market Maker
VisiTrade has a proposed online trading platform on the Alphatrade.com website for more than 375,000 active online traders. This should attract many interested traders to sign up for VisiTrade’s unique 24/7 services. Through this trading platform VisiTrade intends to cut out the Market Maker.
What is a Market Maker?
A market maker is a person or a firm who quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread. This is a professional securities dealer who has an obligation to buy when there is an excess of sell orders and to sell when there is an excess of buy orders. By maintaining an offering price sufficiently higher than their buying price, these firms are compensated for the risk involved in allowing their inventory of securities to act as a buffer against temporary order imbalances.
A Market Maker facilitates the exchange trading of securities in which one individual or firm acts as a market-maker in a particular security, with the obligation to see that trading in that security is fair and orderly by offsetting temporary imbalances in supply and demand by trading for his own account.
Market Makers also exist in the commodities industry where a floor trader or local who, in speculating for his own account, provides a market for commercial users of the market.
In foreign exchange trading, where most deals are conducted on OTC, and are therefore completely virtual, the market maker sells to and buys from its clients. Hence, the client’s loss is the company’s profit and vice versa. Most foreign exchange trading firms are market makers and so are many banks, although not in all currency markets.
Most stock exchanges operate on a matched bargain or order driven basis. In such a system there are no designated or official market makers but market makers nevertheless exist. When a buyer’s bid meets a seller’s offer (or vice versa) the stock exchange’s matching system will decide that a deal has been executed.
In the United States, the New York Stock Exchange (NYSE) and American Stock Exchange (AMEX), among others, have a single exchange member, known as the “specialist,” that acts as the official market maker for a given security. In return for providing a required amount of liquidity to the security’s market, being on the other side of trades when there are short-term buy-and-sell-side imbalances in customer orders, and attempting to prevent excess volatility, the specialist is granted various informational and trade execution advantages.
Other U.S. exchanges, most prominently the NASDAQ Stock Exchange, employ several competing official market makers in a security. These market makers are required to maintain two-sided markets during exchange hours and are obligated to buy and sell at their displayed bids and offers. They typically do not receive the trading advantages a specialist does, but they do get some, such as the ability to naked short a stock, i.e. selling it without a borrow. In most situations only official market makers are permitted to engage in naked shorting.
On the London Stock Exchange (LSE) there are official market makers for many securities (but not for shares in the largest and most heavily traded companies, which instead use an automated system, SETS). SETS is scheduled to be replaced by TradElect on 18th June 2007. Some of the LSE’s member firms take on the obligation of always making a two way price in each of the stocks in which they make markets. It is their prices which are displayed on the Stock Exchange Automated Quotation system, and it is with them that ordinary stockbrokers generally have to deal when buying or selling stock on behalf of their clients.
Proponents of the official market making system claim market makers add to the liquidity and depth of the market by taking a short or long position for a time, thus assuming some risk, in return for hopefully making a small profit. On the LSE one can always buy and sell stock: each stock always has at least two market makers and they are obliged to deal.
This contrasts with some of the smaller order driven markets. On the Johannesburg Securities Exchange, for example, it can be very difficult to determine at what price one would be able to buy or sell even a small block of any of the many illiquid stocks because there are often no buyers or sellers on the order board. However, there is no doubting the liquidity of the big order driven markets in the U.S.
Unofficial market makers are free to operate on order driven markets or, indeed, on the LSE. They do not have the obligation to always be making a two way price, but they do not have the advantage that everyone must deal with them, either.
Source: Visitrade , Furnalds, and Wikipedia
Contact:
Trevor Burns investor@tigercapital.com
Tiger Capital Corporation
416.252.3663 or toll-free 877.844.3704
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GOING INTERNATIONAL
Reaching Other Countries
VisiTrade is taking the next step in bringing the first after-hours trading platform to the European and Asian investment community. The platform will attach to an online trading platform providing investors two trading areas.
To stay informed VisiTrade is giving investors the opportunity to register for updated progess. Registered clients that register will receive emails which communicate the process in obtaining a broker, and when the demo trading board will be available.
Investment in India Online Trading Makes Good Cents and Dollars!
India is Hot in the Investment world now. Indian investors are piling into the stock market. Indian households invested about 5% of their savings in individual stocks and mutual funds in the year ended June 30, up from 1.1% the previous year, according to India’s central bank.
During the past three years, the benchmark Bombay Stock Exchange Sensitive Index has more than doubled in value. At times, the market has been a rollercoaster — around May, it fell more than 29% in just over a month, only to rebound to a record in mid-October.
Now is a great time to get in on the ground floor to offer retail-stock trading and other financial services. As share prices surge, the business prospects appear bright.
The Indian market is strong; online trading as a proportion of overall trading has more than doubled in the past two years. About 1.5 million Indians buy and sell stocks online, with per-person trading averaging less than $150 a day.
CUTTING EDGE TRADING SYSTEM
About Trading
Clients will be able to access the trading boards through the online trading system, VisiTrade will have a separate trading button. By entering the trading system then the client is provided an opportunity to proceed to a company’s trading board. From there will enable the client is able to directly review the company’s order book, AND view both buy and sell orders on that company.
Example:
You want to purchase a 1000 shares of a stock, and after reviewing the order book you see lots 700, 1500, 1700 you will be unable to facilitate that request you can only purchase the lot that is for sale, so in short no partial fills.
The same is true for the sell side: if your looking to sell 200 shares of stock the only way you will be able to do so is to find a buy order for 200 shares, or a combination equal to 200 shares.
Trading will begin with a few hundred stocks that have the most liquidly, and add more stocks based on liquidly.
Investors that have an account with the participating Broker will be able to trade immediately, only investors that have an account will be able to trade.
After the broker has opened the Internet trader account the client will be issued and account number to begin trading on the trading system. The account number will allow the broker to process the transaction for $7.00. Investors will be able to modify price or volume at any time without incurring expense.
The trading system is not a matching service so to execute any trade will require a submission of the buy or sell order. Orders are processed on a real time basis.
AlphaTrade Agreements Creates Visibility for 375,000 Online Traders
VisiTrade has entered into an Agent Compensation Agreement and an Advertising Agreement with AlphaTrade.com.
Under the terms of these agreements, VisiTrade traders will be referred to the AlphaTrade.com website where they can access high performance streaming market data covering stocks, options, e-minis, mutual funds for all North American markets and currencies. When the traders sign up for further premium market services including real time market quotes, Level 2 pricing, advanced charting, and sophisticated market studies, a monthly compensation commission will be generated for VisiTrade Inc. The advertising part of the agreement will highlight the VisiTrade online trading platform on the Alphatrade.com website to more than 375,000 active online traders. This should attract many interested traders to sign up for VisiTrade’s unique 24/7 services.
“The agreements with AlphaTrade.com will generate tremendous exposure for VisiTrade’s online trading platform. The compensation agreement supports VisiTrade’s goal of a steadily growing stream of revenues combined with the advertising agreement that should attract a growing number of traders to the VisiTrade platform.