What it is:
One-way markets can be volatile and very stressful for market makers. Market makers are obligated to facilitate trading in particular market maker is likely able to sell the for a very high price in this type of one-way market. This in turn means, however, that investors likely pay a very high price.even if doing so is inconvenient or less profitable. In our example, it can also be very profitable for market makers: if everybody wants to buy the and the is the only one selling, the
How it works/Example:
Let's say Company XYZ is a pharmaceutical company that has been researching cures for cancer. After 30 years of experiments, it finally makes a key discovery that enables it to create and patent a cancer vaccine that is 90% effective. This is a revolutionary discovery that save millions of lives immediately, and because the invention is patented, Company XYZ be the only supplier of the vaccine, which it in a very lucrative position.
Accordingly, once the news gets out, virtually every investor wants to buy of Company XYZ and nobody wants to sell. This creates a one-way market. The financial institutions that act as makers for Company XYZ have an obligation to facilitate trades and thus act as sellers. Accordingly, they only present an price for the shares in their inventory.