Definition
Stock Market Jobbers, primarily referred to in the United Kingdom, were traders who bought and sold securities on the London Stock Exchange on their own behalf. Their objective was to profit from the bid-offer spread. However, the role of the jobber has largely disappeared after the “Big Bang” market reforms in the UK in 1986.
Key Takeaways
- Stock Market Jobbers are specialized individuals or companies in the stock exchange who act as market makers. They maintain liquidity and continuity in the marketplace by buying and selling securities from their own inventory, effectively facilitating transactions for brokers and investors.
- The jobber’s role is central in the financial markets, especially in places like the London Stock Exchange before the ‘Big Bang’ in 1986. Jobbers’ goal is to profit from the spread, which is the difference between the buying and selling price of the stocks they deal with.
- The concept of jobbers has largely been replaced in the modern era by electronic trading and a more centralized market system. However, the principles behind the jobber’s function can be seen in modern-day market makers and liquidity providers.
Importance
Stock Market Jobbers are a crucial part of the financial system, especially in the context of the London Stock Market where this role originated. Their importance lies in the fact that they act as intermediaries in financial markets, holding stocks and shares on their own account and providing liquidity to the markets.
They are prepared to both buy and sell the securities they deal in, making earnings on the spread between buying and selling prices. This enables transactions to be executed quickly and efficiently.
Without jobbers, buyers may struggle to find sellers, and vice versa, stalling the flow of the market. While modern electronic trading systems have largely replaced their function, understanding the role that jobbers played provides important insight into the history and functioning of stock markets.
Explanation
Stock Market Jobbers, also known as market makers in some cases, play a key role in ensuring liquidity and efficient functioning in the stock markets. Essentially, their primary purpose is to balance the financial market by maintaining an inventory of stocks.
They serve as an intermediary by buying stocks when there are no public buyer and selling stocks when there are no public sellers, thereby preventing large fluctuations in stock prices. The existence of jobbers in the stock market can help the overall smooth operation of trade activities and stabilize stock price movements.
In regard to their use, jobbers are vital for maintaining the bid-ask spread, which is the difference between the prices at which Jobbers are willing to buy and sell stocks. This spread represents the profit for the jobbers and is a crucial element that ensures their active participation in the market.
By constantly maintaining a stock inventory, they provide a level of certainty to investors and traders who might wish to buy or sell at any given time. This constant activity by jobbers immensely contributes to enhancing market efficiency, encouraging trading, and increasing the overall liquidity in the markets.
Examples of Stock Market Jobbers
Jobbers, also known as stockbrokers or traders, play an important role in the financial markets. They make a market by maintaining an inventory of securities and trading them at their own risk. Here are three examples of jobbers:
Investment Banks: Companies like Goldman Sachs, J.P. Morgan, and Morgan Stanley function as jobbers. They buy and sell stocks, bonds, and other securities, and work as intermediaries between the investor and the company.
Stock Brokerage Firms: Organizations like Charles Schwab, Fidelity, and E*TRADE are prime examples of jobbers in the real world. Their main role is to assist clients in buying and selling securities and earn commission on each trade.
Market Makers: A market maker, like Citadel Securities, is a company or individual that regularly buys and sells securities at a publicly quoted price to provide liquidity to the markets. They are ready to buy or sell at any time, making a profit off the bid-offer spread.
FAQs for Stock Market Jobbers
What is a Stock Market Jobber?
A Stock Market Jobber, also known as a market maker, is a firm or individual who stands ready to buy and sell a particular stock on a regular and continuous basis at a publicly quoted price. Their main function is to maintain fluidity and regularity in the stock market transactions.
What is the role of a Stock Market Jobber?
Stock Market Jobbers contribute to the liquidity and overall solidity of the market by providing an essential service to investors and institutions. They ensure stocks can be easily bought or sold by continuously offering to buy or sell at the quoted prices.
What is the difference between Stock Market Jobbers and Brokers?
Jobbers and brokers both play vital roles in the stock market, but their functions differ. Jobbers buy and sell assets for their own account, while brokers act as intermediaries between buyers and sellers, earning a commission for their services.
What are the benefits of Stock Market Jobbers to the financial market?
Jobbers increase the fluidity and stability of financial markets by always being ready to undertake transactions. They reduce volatility and uncertainty, promoting investor confidence and contributing to the efficient functioning of markets.
How do Stock Market Jobbers make profit?
Jobbers make a profit through the bid-ask spread, which is the difference between the price at which they are willing to buy a security (bid price) and the higher price at which they are willing to sell it (ask price).
Related Entrepreneurship Terms
- Stock Brokers
- Trading Floors
- Market Makers
- Securities
- Stock Exchange
Sources for More Information
- Investopedia: They offer a comprehensive finance dictionary that includes clear definitions of more obscure terms like “stock market jobbers”.
- Economics Help: This website can be helpful for explaining the historical role of jobbers in the UK stock market, as well as related economic principles.
- Financial Times: An internationally recognized newspaper known for its reporting on financial and economic issues, including those related to the stock market.
- Bloomberg: Bloomberg provides news, market data and analysis, including towards stock market roles like jobbers.
