Why MM Membership?

The major benefits of Market Maker are as follows:

• Market making benefits: Market Makers can benefit largely from competitive selection of quotes as well as proper risk management techniques. They can profit by doing Market Making for positions of other market makers and clients available in the market.
• Spread Benefit: Market Makers are allowed to use given range of spread to quote the prices, which results in good spread benefit if orders are executed at their price and can settle any of their open position quite often and when required.
• Competitive advantage: The more competitive prices MM quote more are the chances of getting their orders executed. They can deal with the huge number of trading crowd under Price-Time Priority principle.
• No need of marketing: MM can flow the quotes for all the traders without any concern to which Clearing Member they belong to. Moreover, CMs along with the brokers will be responsible for the overall marketing and expanding client base.
• Greater Liquidity: Frequent quotes, trades, execution and settlement provide greater liquidity in the market. Liquidity ensures that investors in financial markets can obtain and liquidate the positions that they seek or already have with ease, so that their intended investment or trading strategy can be implemented effectively and on time.
• Transparency leading to greater credibility: Under this model, all quotes are flown to the market and cleared & settled by the market itself which leads to complete transparency in trade. Because of competitive nature of order matching mechanism, clients will be getting the actual or closest quotes to trade and moreover they can also view the entire market depth too.
• Margin Release facilities: As MMs are quoting bid and ask prices simultaneously; in case of execution of both buy and sell quotes, the initial margin goes free for the particular quantities which allows MMs to increase their trade lots.
• Risk Transfer among MMs: As there will be many market makers in the trade; one MM can even transfer his open positions to other MMs by closing its open positions for the risk mitigation. In the absence of any MM to take the transferred position, Clearing House will take the ultimate liability.