Question

1.Stock markets halted for unprecedented third time due to coronavirus scare, does it make a difference? (use S&P500 to answer this question)

2.What do market makers do? How does it benefit themselves and everyone else?

Answer 1

a) The stock market has responded to the COVID-19 pandemic with worrying the volatility, as traders have a panic fear of being sold out. In the recent turmoil, the market expected a circuit breaking that attempt to prevent panic-trading, that have been triggered many times in March. The huge drop is observed all across the globe, the exchange working in London, Japan, Hong Kong and Shanghai suffered the losses for the days. The S&P500 triggered a level 1 market-wide circuit breakers during the opening hour on March 9, 12 and 16 is based on drops of 7% from the previous day closing and tripped later in the day on March 18. There is a guideline that says a mandatory a 15-minute pause in the trading on all U.S. stock exchange if the S&P 500 index falls more than 7%. The first two levels of breaks are set to halt trading for 15 minutes, but a level 3 will suspend trading for the rest of the day.

b) The market - maker is an individual who actively quotes the two-sided markets in a security that provides bids and offers. Market makers are compensated for the risk of holding assets because it may be seen as decline in the value of a security after it has been purchased from a seller and before its sold to a buyer. The common type of market maker is a brokerage house that provides purchases and sales solutions for teh investors in an effect to keep the financial markets liquid. they trade for themselves and must also give a cut to the Bank. Their job entails organizing a balanced and liquid market.