ON MARKET MAKER FUNCTIONS
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Abstract
Since market scoring rules have become popular as a form of market maker, it seems worth reviewing just what such mechanisms are intended to do.The main function performed by most market makers is to serve as an intermediary between people who prefer to trade at different times. Traders who have the same favorite times to trade can show up together to an ordinary continuous double auction, and then make and accept offers to trade. But when traders have different favorite times, a market maker can help them by first making offers that some of them will accept, and then later making opposite offers which others will accept. By adjusting prices in his favor, a market maker can even profit from providing this service.
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References
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