What is a requirement of market makers under a market maker agreement?

• A. To publish quarterly financial statements.
• B. To set the official closing price.
• C. To guarantee profits.
• D. To provide binding quotes (bid and/or offer prices) for certain securities during the trading day.

Answer: (D)

The essential idea here is liquidity provision. A market maker commits to posting firm bid and offer prices for certain securities during trading hours and to honoring those quotes. This makes it easier for other participants to buy or sell, reduces the time needed to find a counterpart, and helps keep markets orderly.

So, a market maker agreement typically requires quotes that are binding for a defined period and size, meaning the market maker must be willing to buy at the bid and sell at the offer within those terms. This obligation is what gives traders a reliable price reference and access to immediate liquidity.

The other options aren’t obligations of market makers. Publishing quarterly financial statements is a general reporting duty for issuers, not a market maker requirement. Setting the official closing price isn’t something a market maker does—the closing price is determined by the exchange or the last traded price. Guaranteeing profits is not something any market participant can promise.