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Username: PrettyWoman

Rating:
Guru Stars

Asked to: Chaoxiang Lee

Date Created: 30 Mar 2017
Category 40
Tag Financial
Question Please give the definition of 'Two-Sided Market'.
Advice from Guru
Hello PrettyWoman,

A market in which market makers (or specialists) are required to give both a firm bid and firm ask for each security in which they make a market. In other words, those making the market must be willing to both buy and sell at the prices they quote.

Also known as a "two-way market".

People mainly use this term in the context of the Financial Industry Regulatory Authority (FINRA) requirement that Nasdaq market makers give both a firm bid and firm ask for each security in which they make a market. However, this term can also be applied in the bond market. For example, some broker-dealers make two-sided markets on larger, actively traded bonds and rarely make a two-sided market in inactively traded bonds. The theory is that this helps to enhance liquidity and market efficiency.

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