Chartered Institute of Stockbrokers (CISI) Professional Practice Exam 2025 - Free CISI Practice Questions and Study Guide

The role of a market maker in the financial markets is to buy and sell securities in order to provide liquidity to the market. This involves continuously quoting prices for specific securities, which allows investors to buy or sell these securities without significant delays. By doing this, market makers facilitate smoother trading processes and help to maintain an orderly market.

Market makers hold a certain number of shares in their inventory, and when a buyer or seller comes into the market, they step in to complete the transaction, agreeing to buy or sell at the prices they have quoted. This ability to quickly provide the opposite side of a trade is crucial for maintaining liquidity, as it ensures that there are always buyers and sellers available, reducing the time and effort required to execute trades.

While providing loans to investors, setting prices for stocks, or managing investment portfolios may be important functions in the financial markets, they do not specifically describe the fundamental role of a market maker, which is primarily focused on enhancing liquidity through the continuous buying and selling of securities.