Market maker

Market makers are wholesale traders who make a two-way price in securities on a range of electronic trading platforms including, primarily, the London Stock Exchange on a continuous daily basis. They mainly deal with other member firms.

Also known as:

• Stocks and shares dealer
• Trader - financial markets

Work activities

Market makers are specialised wholesale securities traders or dealers. They try to make a profit by selling securities above the price at which they were bought, or buying at a lower level than they sold, called selling short. Market makers determine prices by studying the supply of, and demand for, securities (financial investments traded on a stock exchange, such as shares or bonds).

They try to predict how the markets will move, and then buy and sell accordingly. When a market maker registers in a particular stock, they are expected to make a continuous price in that security to other member firms dealing on behalf of clients. Bad news about the fortunes of a company is likely to reduce demand for its shares, and market makers could be forced to lower the price. A shortage of a particular security means that market makers can raise the price to attract sellers. Prices are based on demand and supply of a security plus other factors such as the market maker’s own view, after doing research.

Market makers obtain a picture of market trends by reading financial papers and reports produced by investment analysts. However, as the securities market can change very quickly, they also need to use databases to obtain the latest financial news. Market makers sit at a dealing desk and keep track of prices using computer screens, microphones and telephones. Information is changing all the time and large amounts of money can be made or lost in just a few minutes. Buying and selling prices are set and securities traded with market makers, stockbrokers and other traders, using a computerised system, for example, the Stock Exchange Trading Service (SETS). Market makers are in competition with other market makers for stockbrokers’ and other market participants’ trade. Dealers who wish to trade contact market makers to start negotiations. Although most of these negotiations are conducted over the telephone, meeting other dealers is also very important as it is essential to keep well informed.

Personal qualities and skills

As a market maker, you’ll need to be able to:

• Make quick, accurate judgements.
• Analyse large amounts of information.
• Work to deadlines.
• Work unsupervised.

You should have:

• Good communication skills.
• Confidence.
• Number skills and an aptitude for mental arithmetic.
• Initiative.
• Negotiating skills.
• Stamina and motivation.
• A good memory.
• Strong IT skills.

Personality, relevant work experience and a flair for the job are just as important as qualifications.

Pay and opportunities

According to job site Glassdoor, market makers in the UK earn between £46,000 and £78,000, with the average salary around £69,000. Salaries are generally increased by performance-related pay and bonuses. Other benefits could include private health care, gym membership, medical insurance, and life and pension cover.

Typically, market makers work from 7am to 5pm, Monday to Friday, in an extremely pressured environment.

Employers are market-making firms. These are often part of larger financial organisations made up of banks, stockbrokers and investment advisers.

Opportunities for market makers occur in London, the major financial centre in the UK.

Where are vacancies advertised?

Vacancies are advertised in national newspapers, on financial job boards and on employers’ websites.

Entry routes and training

Larger companies that are members of the London Stock Exchange usually prefer graduates. Your degree subject is not always important, although a degree in a business- or economics-related subject might give you an advantage. Many employers ask for at least a 2:1 degree. Some people enter with a postgraduate qualification. Personal qualities are equally as important as academic qualifications for market making. Some entrants have worked as investment analysts or stockbrokers.

You could enter a career in stocks and shares by applying for a level 6 (higher) apprenticeship in the role of financial services professional.

Entrants receive on-the-job training and, if they give investment advice to retail clients, must pass an exam that is recognised by the Financial Conduct Authority (FCA). Further study for relevant professional exams and postgraduate qualifications, such as the Chartered Financial Analyst (CFA UK) or the CISI Master’s in Wealth Management, is possible.

Market makers can progress to senior and management posts, and by moving to larger organisations.

Rehabilitation of Offenders Act: Working as a dealer in securities is an exception to the Rehabilitation of Offenders Act 1974. This means that you must supply information to an employer about any spent or unspent convictions, cautions, reprimands or warnings, if they ask you to. This is different from other careers, where you only have to reveal information on unspent convictions if you are asked to.

Qualifications

For entry to a degree course, the usual minimum requirement is:

• Two to three A-levels
• GCSEs at grades 9-4 in two to three other subjects
• English and maths at GCSE at grades 9-4.

Alternatives to A levels include:

• Edexcel (BTEC) level 3 National qualifications.
• International Baccalaureate (IB) diploma.

However, course requirements vary, so check prospectuses carefully.

To get onto a higher apprenticeship programme, you will need:

• Two A-levels/equivalent in relevant subjects.
• GCSEs in English and maths.

Adult opportunities

Age limits: It is illegal for any organisation to set age limits for entry to employment, education or training, unless they can show there is a real need to have these limits.

Knowledge of the securities industry is important. Some applicants have developed relevant skills by working in accountancy, economics, banking or insurance.

If you don’t have the qualifications needed to enter your chosen degree course, a college or university Access course (for example, Access to Business) could be the way in. No qualifications are usually needed, but you should check this with individual colleges.

Relevant professional qualifications are available by distance learning from the Chartered Institute for Securities & Investment (CISI) and the CFA Society of the UK.

Related careers

• Commodity broker
• Investment analyst
• Investment manager
• Pensions consultant
• Stockbroker