In English, please?
A market maker is someone regularly engages in buying AND selling a particular security, obviously at two different prices. They make money based on the price spread and turnover. They’re required to buy and sell at their advertised prices, which creates liquidity for other traders – ie they always have a place to go to buy or sell.
Ok, so being on the floor is A) fun and B) makes money for the people on the floor.
But what’s in it for the customers? What advantage is there to the big fish and their orders of 1000+ shares? Or does no one ask them, and the guys on the floor just rip the orders from them so they could make bucks in the process? And whoever runs the NYSE gets a cut?
Have you ever heard the joke about the new employee at a hedge fund who goes to the marina and wonders where all the customers’s yachts are?
Does the market-maker pays the exchange for the right to be the market-maker?
Well you save the differential, right? Wasn’t that one of the big selling points of trading NASDAQ stocks? Obviously you give up some advantages by switching to electronic, but there are a lot of stocks traded electronically worldwide. It seems reasonable that it is because there are advantages.
Here’s my attempt at rephrasing the OP:
If I’m reading the NYTimes correctly, over one and a half billion shares were bought/sold today on the New York Stock Exchange. How many of those were done by the people in the Pit? I’d imagine it to be a very small percentage. So small, in fact, that if it were eliminated, the only people who would notice are those who work there themselves.
But if I’m wrong, I welcome the opportunity to be enlightened.