In a Dealer Market, many dealers offer the prices at which they would buy or sell a given security or instrument on the financial market. The dealers (also known as “market makers”) who are willing to make a market in a security electronically display the prices at which they are willing to do so, indicating both the price at which they will buy the security (the “bid” price) and the price at which they will sell it ( the “offer” price). This create liquidity and transparency in the dealer market.Dealers show where supply and demand for that specific securities converge by providing these prices. Investors may find this useful in deciding where to place trades.In addition to providing liquidity and transparency, dealer markets also offer other benefits. For example, because there is competition among dealers to offer better prices, this can lead to increased efficiency in terms of how assets are allocated across different markets. Additionally, since each dealer stands ready to buy or sell securities at its quoted bid/offer spread Prices), this helps reduce volatility in securities pricing as well as minimize information asymmetries between buyers and sellers.
