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Exchange-Registered Market Making

Adding Liquidity and Connecting Markets around the World

The markets need market makers. As an exchange registered market maker, KCG engages in principal trading, making markets and adding necessary liquidity to the marketplace.

Market makers provide a very valuable service to the global investment community, decreasing volatility, assisting in price discovery and lowering the costs of risk transfer. KCG’s significant participation as a market maker allows investors to easily buy and sell what they want, when they want, with minimal market impact. Our presence continually buying and selling reduces friction in the markets and ultimately improves execution quality by lowering transaction costs and improving pricing.

Expanding Our Impact

We are using the know-how and innovations which have made us one of the largest independent market makers in U.S. equities, to transform and expand markets around the world.

We built our technology and our understanding of how to interact with various forms of liquidity with the intent of facilitating transparent, liquid and orderly markets. With this expertise, we have crossed borders and are building a presence on the major exchanges around the world. At the same time, we are helping to transform non-equity markets by porting technology and functionality from equities to other asset classes, including fixed income, foreign exchange and commodities.

The largest independent market maker in U.S. Equities.*

Understanding Liquidity and the Evolution of Markets

Liquidity is a measure of how quickly an asset can be converted into cash. When observing an entire market such as the stock market, liquidity is seen as a proxy for the ease or speed with which an investor can complete a transaction without significantly impacting an asset’s price.

In an illiquid market like real estate, natural market interactions involve buyers and sellers motivated to own or sell an asset for their own use. These types of transactions can be inefficient when considering the time it takes complete a sale. This type of market lacks intermediaries who provide risk transfer services to bridge the gap in time between when buyers and sellers meet. 

In contrast, a liquid market often uses intermediaries or wholesalers to create a faster and more convenient experience. For example, a store purchases products from wholesalers and sells these to consumers. Because products are readily available for consumers to purchase at their convenience, and a store purchases items even though they may not have a customer at hand to sell them to, the retail market would be considered a very liquid market. This is known as a “continuous market.”

Today’s stock market is the result of an evolution from a natural market to a continuous market. When the stock market centered around natural-driven exchanges, trying to trade shares in a company meant talking to other investors that might be interested, advertising in specialized trade publications or taking out a space in a regional newspaper. Without ready counterparties, it was difficult to execute trades quickly, and it was not always apparent that best price was being offered or that the deal could be completed in a reasonable amount of time.

Contemporary investors have chosen a market structure that instead prioritizes immediacy and certainty. Intermediaries like market makers post prices to create transparency and stand ready to make continuous, liquid markets. The result of this liquidity is that traders can take part in a transaction wherever and whenever they like—and be confident in the security of their trades.