What is the role of a market maker?

The role of a market maker is crucial in maintaining liquidity in the financial markets. By buying and selling securities at quoted prices, market makers facilitate transactions, allowing other traders to enter and exit positions without causing significant price fluctuations. This function helps ensure that there is always a buyer or seller available for a given security, thus promoting a more efficient and stable market environment.

Market makers quote both buy and sell prices, and their willingness to trade at these prices enables other market participants to execute trades quickly. Their activities essentially reduce the spread between the bid and ask prices, benefiting market participants who wish to trade more seamlessly. This liquidity provision is fundamental to the overall functioning of financial markets, as it helps manage supply and demand effectively.

The other options reflect roles that do not align with the specific function of a market maker. For example, issuing stocks pertains to an activity more relevant to investment banks, advising investors involves a role more suited for financial advisors, and managing investment portfolios is associated with asset management firms. Thus, the correct answer indicates the primary responsibility of market makers in the buying and selling of securities.