Football Index Market Makers:
What is a Market Maker?
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With the recent updates to our platform, it’s important that traders understand Market Makers, which are a huge part of Football Index’s plan to offer liquidity.
I’ll be explaining exactly what a Market Maker is, how they work & what you should expect from them.
What is a Market Maker?
A Market maker is simply an individual, or a company which offers both a Buy and Sell price on various stocks, or in our case… different players.
They are called market makers as that’s exactly what they do, making the market by readily standing in to buy or sell.
A Market maker will profit on the bid-ask spread, but they provide the much-needed liquidity to the market.
How a Market Maker helps the market
Liquidity is required for any market, and without a market maker… liquidity isn’t guaranteed. This can slow the buying and selling on a platform, but also provide a low depth of market.
The market makers job is to provide Buy & Sell prices for various stocks, which can lead to the market becoming more stable. Without the market maker, traders on Football Index are likely to undercut each other, trying to force a sale. This is something which has been happening on the platform.
Players are dropping in price, although they aren’t actually selling them. Think of it using this scenario below.
Adam has an Xbox for sale, which he wants £200 for. He’s got it listed for sale on eBay. After looking at Adams Xbox for sale, Mike has decided that he wants to sell his Xbox. He wants a quick sale, so he’s going to offer his for £190.
Adam now isn’t the go-to option, meaning that he has to take action to be in with the best chance to sell. Adam relists his console for £180.
You know what comes next, Mike decides to drop to £170. That’s what is happeneing on the platform right now.
The craziest thing is that they’ve both lost 15%, without anyone having sold up. This could go on and on.
A market maker would have been able to step in, offering a guaranteed £180 for the console, giving Mike and Adam a better price than if they fought each other down.
Ready to Start Trading?
When you register at Football Index, you can claim a special offer. This will enable you to trade risk free, where any losses up to £500 are refunded, as cash. Remember to use code FIA when you sign up.
How does a Market Maker make money?
A market maker will make profit on the difference between the bid and ask prices, on their trades.
This is similar to how Football Index were making money on the spreads.
What is LP001?
LP001 is the first official market maker for the Football Index platform. We were told in July that LP001 was active, with a formal agreement which would supply millions of pounds worth of liquidity into the markets.