Share Price Question
Discussion
As a basic summary, the market for shares is kept active (liquid) by Market Makers who provide a pool of shares available to trade.
Each Market Maker will commit to act as a buyer or seller as needed for a specific range of shares. The bid and ask prices are the average prices that the market makers in a share are offering to buy or sell at. Different MMs can offer a different spread of prices. You will find that your broker can sometimes get a better price by trying a different mm.
What you will see is that the variation between bid and ask will vary depending on conditions. If too many people are wanting to buy then they will put up the ask.
You will also see reference to NMS (Normal Market Size) which is the number of shares for which the prices would hold. If you wanted to buy or sell numbers in excess of that then they will give a specific price - generally because you are moing into volumes which could alter the share price.
You could think of it as being similar to specialist used car dealers. They will buy and sell specific cars (with the difference between buying and selling being their spread). They maintain a pool of available cars and provide a way for you to buy or sell without having to faff about finding an individual that wants or offers the car you want.
Each Market Maker will commit to act as a buyer or seller as needed for a specific range of shares. The bid and ask prices are the average prices that the market makers in a share are offering to buy or sell at. Different MMs can offer a different spread of prices. You will find that your broker can sometimes get a better price by trying a different mm.
What you will see is that the variation between bid and ask will vary depending on conditions. If too many people are wanting to buy then they will put up the ask.
You will also see reference to NMS (Normal Market Size) which is the number of shares for which the prices would hold. If you wanted to buy or sell numbers in excess of that then they will give a specific price - generally because you are moing into volumes which could alter the share price.
You could think of it as being similar to specialist used car dealers. They will buy and sell specific cars (with the difference between buying and selling being their spread). They maintain a pool of available cars and provide a way for you to buy or sell without having to faff about finding an individual that wants or offers the car you want.
Edited by mas99 on Friday 12th December 14:54
mas99 said:
As a basic summary, the market for shares is kept active (liquid) by Market Makers who provide a pool of shares available to trade.
Each Market Maker will commit to act as a buyer or seller as needed for a specific range of shares. The bid and ask prices are the average prices that the market makers in a share are offering to buy or sell at. Different MMs can offer a different spread of prices. You will find that your broker can sometimes get a better price by trying a different mm.
What you will see is that the variation between bid and ask will vary depending on conditions. If too many people are wanting to buy then they will put up the ask.
You will also see reference to NMS (Normal Market Size) which is the number of shares for which the prices would hold. If you wanted to buy or sell numbers in excess of that then they will give a specific price - generally because you are moing into volumes which could alter the share price.
You could think of it as being similar to specialist used car dealers. They will buy and sell specific cars (with the difference between buying and selling being their spread). They maintain a pool of available cars and provide a way for you to buy or sell without having to faff about finding an individual that wants or offers the car you want.
Thanks for taking the time to explian that to me. Its a great help!Each Market Maker will commit to act as a buyer or seller as needed for a specific range of shares. The bid and ask prices are the average prices that the market makers in a share are offering to buy or sell at. Different MMs can offer a different spread of prices. You will find that your broker can sometimes get a better price by trying a different mm.
What you will see is that the variation between bid and ask will vary depending on conditions. If too many people are wanting to buy then they will put up the ask.
You will also see reference to NMS (Normal Market Size) which is the number of shares for which the prices would hold. If you wanted to buy or sell numbers in excess of that then they will give a specific price - generally because you are moing into volumes which could alter the share price.
You could think of it as being similar to specialist used car dealers. They will buy and sell specific cars (with the difference between buying and selling being their spread). They maintain a pool of available cars and provide a way for you to buy or sell without having to faff about finding an individual that wants or offers the car you want.
Edited by mas99 on Friday 12th December 14:54
Matt
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