Price position of the brokers 2020 - difference exchange & market maker

Different course positions in 2020: How do stock market prices and market maker courses differ? Facts in the guide Use knowledge & open an account.

Beginners who are dealing with the financial market and the stock exchange for the first time are not only confronted with a wealth of information, but also have to know about the characteristics of trading. This includes, among other things, the cost structure of the products and how they work before the actual values ​​are analyzed. The mistake that beginners often make is that they go straight to the analysis and do not first have to deal with the customs of the stock exchange.

But what should be noticed by everyone is the variety of course providers. The trader therefore asks himself what the differences are and which courses are the most reliable.

What are the differences between courses?

Courses, generally referred to as data feed, can differ due to different properties, The basic differences lie in the data providers. On the one hand, these are the stock exchanges, on the other hand, prices can also be set by market makers. These are financial service providers such as banks, brokers or other institutions.

  • Exchanges
  • Market Makers

The prices of the exchanges are the most important because they usually also represent the reference prices of the market makers. All relevant exchanges sell their data feed to brokers so that brokers can pass it on to customers. Institutional traders can obtain the data feed directly from the stock exchanges.

In addition, a distinction can be made between real-time and delayed prices. Delayed prices on the stock exchanges are therefore freely accessible to everyone. Real-time prices must either be acquired or obtained from other portals or brokers, which is not a problem for the most liquid assets today.

Price position of the brokers 2020 - difference exchange & market maker

What is the difference between exchange and market maker prices??

As shown above, stock exchange prices are the actual reference prices. If someone wants to buy the DAX index, he does so through his broker, who forwards the order directly to the stock exchange. The order is then executed at the given exchange price, for example XETRA. In the case of futures, it would be EUREX.

When it comes to trading OTC (Over the Counter) derivatives, it is important to look at the whole thing a little more differently.

OTC means that trading takes place outside the stock exchanges. Another institution provides the marketplace, hence market makers. This applies, for example, to the FOREX market or CFDs (Contract for Difference).

Technically speaking, the whole thing differs only slightly, because the interbank market is also a trading center where buyers and sellers come together. This time, the price is not only set by the stock exchange, but by the market maker.

But now it is also the case that derivatives depend on the price of the exchange-traded value. It is therefore obvious that the market maker uses the same prices as a reference. Most of the time, as far as liquid stocks are concerned, it is the prices of the futures exchanges, as these have longer trading hours. As far as the individual values ​​are concerned, it is roughly the prices of the stock exchanges on which the shares are listed.

There is, however, a small difference between stock exchange prices and market maker prices, although not necessarily at the presentation level. Since market makers set the prices, they do not necessarily have to correspond to the market prices. This had often sparked discussions in the past that there was a conflict of interest. After all, market makers would not be as regulated as exchanges. Is there something there?

That can't be denied. Nevertheless, it makes no sense for market makers to offer prices other than stock exchange prices. First of all, that would involve more effort, and they would continue to question their own trustworthiness, which in turn would make traders stop trading about them. Professional traders pay attention to price differences and would notice a manipulation very quickly.

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If you deal with prices, you can find them on various portals, prices from stock exchanges, brokers or banks. Obtain indications free of charge. The beginner ultimately wonders which of them to analyze.

As a rule, it can be said that stock market prices are the most reliable. However, it cannot be ruled out that broker prices, if they are close to the stock exchange reference price, are equally suitable. Bank indications can have larger deviations because they do not forward the price like brokers, but actually set their own.

Brokers like 24Option set the prices, but these are based on the stock exchange prices as a reference. This also makes sense, since the values ​​that can be traded through the broker represent the most liquid values ​​- and market prices are suitable for the most liquid values.

Price position of the brokers 2020 - difference exchange & market maker

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