Market making versus market fixing

How a nation decides to approach the issue of market regulation is often the product of its cultural heritage. In societies with a tradition of a free market economy, market makers dictate how a market should behave.

Market makers

Who are the market makers?

· Market makers can be significant players in the financial market. In other words people and organizations with lots of money.

· They can also be people and organizations with informational influence. It would be a traditional mainstream news company or prominent people on social media.

· Market makers can also be actors with regulatory power. For example, a central bank that raises or lowers interest rates depending on the policy it pursues.

Fixing the market

There are not many players who can perform market fixing. Market fixing requires regulatory power to be exercised.

Market fixing is often done by decree. These decrees are often brutal and unexpected. This means that the regulator does not warn before fixing the market.

Only one actor can have such self-sustaining power: governments.

And not just any government can do that. More often than not, it is the governments that do not need the consensus of their constituents to carry out their action that can do that.

Market fixing can be used alongside market making. Market fixings are usually used in desperate times when desperate measures are needed.

Market fixing can also sometimes have motivations that are not very easy to understand.

As said before market fixing is used by governments when the situation is desperate. And by desperate I mean the political situation is desperate. Such an example can be a sudden international isolation and the application of economic sanctions.

A government will not use market fixing for a situation detached from any political cause (eg a recession).