MarketMakingElementen

MarketMakingElementen refers to the components that constitute market making in financial markets. Market making is the activity of a firm that commits to continuously providing two-sided quotes for a financial instrument, thereby supplying liquidity and facilitating trading.

Liquidity provision is the central element: a market maker posts bid and ask quotes and stands ready to trade with counterparties, earning profits from the spread and from improved execution quality for clients and the venue.

Pricing and quote strategy cover how spreads are set, how quotes reflect current market conditions, and how quotes are adjusted in response to order flow, volatility, and inventory considerations.

Inventory and risk management involve controlling exposure, hedging positions, and setting risk limits to mitigate adverse selection, price movements, and funding costs.

Technology and execution infrastructure includes electronic trading systems, order management, routing logic, latency reduction, and connectivity to multiple venues.

Market structure and regulation describe the context in which market making operates, including designated market maker programs, venue rules, and compliance with applicable rules such as MiFID II or SEC guidelines.

Performance and limitations summarize the impact: market making can contribute to tighter spreads and more reliable quotes, but it also exposes firms to inventory risk, adverse selection, and regulatory scrutiny.