The term Market Making is the act of entering bid and offer prices in the automated trading system for a specified security under the conditions stipulated by the stock exchange.
A market maker is obligated to make markets in specific securities, which means to bid (buy) and offer (to sell) the stock at the same time. They trade for their own account and generally try to make money from the spread (the difference between the bid and offer). There are usually market makers for fixed income and variable income securities.
In Nigeria, a “market maker” refers to any dealing member of the NSE who has been appointed, and undertaken to enhance the market liquidity of a particular security in accordance with the NSE rules.
For instance, the market maker for Dangote Cement’s stock might bid 10.61 and offer 10.62. He is hoping someone buys stock from him at 10.62 and someone else sells stock to him at 10.61. He makes the .01 difference between the prices.
The primary role of a market maker is to maintain a fair and orderly market in its particular securities of responsibility and, in general, to contribute positively to the operation of the overall market.
Types of Market Makers
Primary Market Maker – Any market maker who has been appointed by the NSE as the foremost liquidity provider for a particular security and who has undertaken to assume the role.
Supplemental Market Maker – A market maker appointed to act as a supplementary liquidity provider
List of Market Makers in Nigeria for Equities include:
1) Capital Bancorp Plc
2) Chapel Hill Denham Securities Ltd
3) CSL Stockbrokers
4) Dunn Loren Merrifield Limited
5) FBN Securities Ltd
6) Futureview Securities Ltd
7) Greenwich Securities Ltd
8) RENCAP Securities Nig Ltd
9) Stanbic IBTC Stockbrokers Ltd
10) VETIVA Securities Ltd
List of Market Makers for Fixed Income Securities:
1) Capital Bancorp Plc
2) Cordros Capital Limited
3) ESS/Dunn Loren Merrifield
4) FSDH Securities Limited
5) Greenwich Trust Limited
6) Investment One Stockbrokers (formerly GTB Securities)