A third-party firm that stands ready to buy or sell exchange-listed stocks at publicly quoted prices, as opposed to market makers in stocks that trade in over the counter markets (which are simply known as market makers). For execution, non-member brokers may use the services of a third market maker to trade in exchange-listed stocks. Third market makers sometimes pay brokers a small percentage fee per share in return for directing orders their way. Sometimes, brokers and third market makers are one and the same.
Third market makers help add liquidity to financial markets by being ready to assume the role of a buyer or seller to the other side of the transaction, especially in cases a counterparty is not immediately available. As such, third market makers act as intermediaries by buying at relatively lower prices and selling at relatively higher prices.
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