What is a One-Way Market?
Also called a one-sided market in which market makers only show a bid or an price rather than both. In broader , the concept refers to situations in which the entire market is strongly heading in a certain direction., a one-way market is a
How Does a One-Way Market Work?
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 obligation to facilitate trades and thus act as sellers. Accordingly, they only present an price for the shares in their inventory.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
Why Does a One-Way Market Matter?
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