Do You Know Who’s Buying When Everyone In The Market Is Selling?
In its Report on Business section, the Globe and Mail often has a feature called "The Explainer", written by Richard Blackwell. There is a section in one of these articles, published a while ago, that I looked up again because I thought it might be interesting to a lot of you out there.
It explains something that had always been a mystery to me: "When stock markets are plunging, who is buying all the shares that investors are selling?" Below is Mr. Blackwell's wonderfully concise answer. (The full article can be found in the Globe and Mail, November 18th, 2008, p.B5.)
"In order to maintain an orderly market, the Toronto Stock Exchange has a system of "market makers." These are 22 brokerage firms that are assigned to make sure there is stable trading in each stock on the exchange. Essentially, they must step in to buy up shares that are offered by sellers, when there are no other buyers in the market. That ensures anyone who wants to sell stock will always find a buyer."
Eureka! Thank you, Richard Blackwell.
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