two-sided market

Two-Sided Market

A market in which market makers (or specialists) are required to give both a firm bid and firm ask for each security in which they make a market. In other words, those making the market must be willing to both buy and sell at the prices they quote. Also known as two-way market.

Notes:

People mainly use this term in the context of the NASD requirement that Nasdaq market makers give both a firm bid and firm ask for each security in which they make a market. However, this term can also be applied in the bond market. For example, some broker-dealers make two-sided markets on larger, actively traded bonds and rarely make a two-sided market in inactively traded bonds. The theory is that this helps to enhance liquidity and market efficiency.

See also: Bond, Market Makers, NASD, Nasdaq, One-Sided Market, Over-The-Counter - OTC

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Two-sided market

A market in which both bid and asked prices, good for the standard unit of trading, are quoted. When customers or market makers are lined up on both sides (buy and sell) of a stock.

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two-sided market

The market for a security in which a bid price and an ask price are both quoted. Also called two-way market. Compare one-sided market.