Quick Answer
Market maker status depends on the definition: the statute says regular or continuous holding out, the Alternative Display Facility says regular and continuous. Pulling quotes can end a registration, issuer payments for quoting are barred outside three carve-outs, and market maker net capital runs $2,500 per security, or
Quick Answer: Market maker status depends on the definition: the statute says regular or continuous holding out, the Alternative Display Facility says regular and continuous. Pulling quotes can end a registration, issuer payments for quoting are barred outside three carve-outs, and market maker net capital runs $2,500 per security, or $1,000 at $5 or less.
,000 at $5 or less.Who counts as a market maker, how status is gained and lost, and what it costs in capital.
Which One-Liners Win Points?
- The statute's holding-out limb reaches a dealer willing to buy and sell a security for its own account on a regular or continuous basis, by quotations "or otherwise." A dealer acting as block positioner needs no quote.
- A Registered Reporting Alternative Display Facility (ADF) Market Maker holds out on a regular and continuous basis, only in the designated securities it is registered in.
- Over-the-counter (OTC) Market Maker status runs security by security, where the member displays market making interest through an inter-dealer quotation system.
- Market participant identifier (MPID): every ADF Participant obtains one before trade input, even if a third party reports for it. More than one for OTC equity quoting or OTC Reporting Facility reports needs FINRA Market Operations' approval on a written request.
- Floor broker cross, manual transactions only: offer above your own bid by the minimum variation and announce both to the Crowd, with a Trading Official present, first.
- Payments for market making: no member or associated person may accept payment or other consideration, directly or indirectly, from an issuer, its affiliate or its promoter for publishing a quotation, acting as market maker, or applying to do either.
- Payment carve-outs: bona fide services; reimbursement of registration payments imposed by the SEC or state regulatory authorities and of listing payments imposed by a self-regulatory organization; and payments expressly provided for under national securities exchange rules effective after being filed with, or filed with and approved by, the SEC.
Which Numbers Matter Most?
| Item | Value |
|---|---|
| Market maker net capital | $2,500 per security, or $1,000 at $5 or less, on a 30-day average; capped at $1,000,000 unless the general requirement demands more |
| Qualified block positioner | $1,000,000 net capital; blocks worth $200,000 or more |
| ADF voluntary termination | Quotes withdrawn for 5 minutes, or not re-entered within 30 minutes after a halt ends |
| Re-registering after termination | Barred 20 business days, absent an excused withdrawal |
Which Gotchas Trip Students Up?
- Net capital is the greater of the ratio requirement or the highest activity minimum, not their sum, and the market maker computation never drops below it.
- Excused withdrawal status "may be granted," never automatically. An ADF Trading Center asks first, unless it cannot submit automated quotations or respond immediately and automatically to orders; then it withdraws at once and promptly contacts ADF Operations.
- Never a ground: pending news, a sudden influx of orders or price changes, or withdrawing to trade with competitors.
- A market maker whose clearing-arrangement failure terminates its registration in Nasdaq securities skips the 20-business-day bar. It may register at any time after a clearing arrangement has been reestablished.
- The qualified categories serve Regulation U, the Federal Reserve's credit regulation, and the block positioner sells as rapidly as possible commensurate with the circumstances; no day count applies.
One-Breath Recap
The statute's market maker is a specialist permitted to act as a dealer, a dealer acting as block positioner, or a dealer holding out as willing to buy and sell a security for its own account on a regular or continuous basis. An Alternative Display Facility market maker quotes on a regular and continuous basis, and withdrawing quotes for five minutes, or missing the 30-minute re-entry after a halt, ends its registration in that security and bars re-registering for 20 business days, absent an excused withdrawal. A qualified block positioner needs $1,000,000 in net capital and blocks worth $200,000 or more. A market maker computes net capital at $2,500 per security, or $1,000 at $5 or less. Issuer payments for quoting are barred outside three carve-outs.
Need more than the recap? Read the full Achieving Market Making Status unit.