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When a brokerage firm makes a market for a particular company, where and how does the brokerage firm obtain the shares? Does the company just give them some shares to use to make the market? Does the brokerage firm buy shares from the company? Anyone know?
Posts: 352 | From: Marietta, GA | Registered: Nov 2005
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they buy and sell them just like we do in the open market. if a client wants to buy then the brokerage that sells them to you would be short. if they don't want to be short they cover and if they already had some shares they may or may not rebuy what they sold you. if a brokerage does investment banking they may get involved in secondary offerings and aquire shares that way.
Posts: 1045 | From: novato,ca,usa | Registered: Aug 2003
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So they have to buy 'em just like the rest of us? That would take a lot of money to make a market in so many different companies.
Posts: 352 | From: Marietta, GA | Registered: Nov 2005
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yes, the big brokerages generally have 100's of millions in capital. but market makers don't always carry positions over night. they are subject to risk just like us.
Posts: 1045 | From: novato,ca,usa | Registered: Aug 2003
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