Key Concepts
1. Explain how transactions are executed, from the point of the order until the trade is made.
2. Explain the development of electronic communication networks (ECNs), and how they can
improve the structure for executing transactions.
3. Explain how regulation is needed to ensure orderly and fair trading.
POINT/COUNTER-POINT:
Is a Market-maker Needed?
POINT: Yes. A market-maker can make a market by serving as the counter-party on a transaction. Without
market-makers, stock orders might be heavily weighted toward buys or sells, and price movements would
be more volatile.
COUNTER-POINT: No. Market-makers do not prevent stock prices from declining. A stock that has
more selling pressure than buying pressure will experience a decline in price, as it should. The electronic
communication networks can serve as the intermediary between buyer and seller.
WHO IS CORRECT? Use the Internet or some other source search engine to learn more about this issue
and then formulate your own opinion.
ANSWER: While there are some arguments that the market-maker stabilizes the market, yet there is no
evidence that they stand ready to buy up stocks that experience major selling pressure.