SIE (Securities Industry Essentials) Practice Exam

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What is the main function of a market maker in the context of an equity offering?

Buy and sell the shares at quoted bid and ask prices
Predict future stock prices
Provide legal advice on stock offerings
Create market strategies for companies

The correct answer is: Buy and sell the shares at quoted bid and ask prices

Market makers are responsible for maintaining liquidity in the market by continuously buying and selling shares. They are the ones who quote bid and ask prices, which are the prices at which they are willing to buy or sell the shares. This allows investors to easily buy or sell shares at any time, ensuring a healthy market. Option B is incorrect because market makers do not predict future stock prices, they only facilitate the buying and selling of shares. Option C is incorrect because market makers do not provide legal advice, that is the job of lawyers and legal advisors. Option D is incorrect because market makers do not create market strategies, their main function is to maintain liquidity in the market.