Financial Industry Regulatory Authority (FINRA) Practice Exam 2026 - Free FINRA Practice Questions and Study Guide

The role of a market maker in a stock exchange is primarily to provide liquidity by consistently buying and selling securities. Market makers facilitate trading by being willing to buy or sell stocks at any given time, effectively maintaining a market for those securities. This activity helps to ensure that there are always buyers and sellers available for a stock, which reduces the bid-ask spread and allows for smoother and more efficient transactions. By standing ready to make transactions, market makers contribute to the overall stability and efficiency of the market, making it easier for investors to execute trades without significant price fluctuations.

In contrast, the other options represent different functions that do not align with the primary responsibilities of a market maker. Evaluating and underwriting new stock issues pertains to investment banking rather than market making. Executing trades on behalf of clients describes the role of brokers, who facilitate transactions for investors but do not provide liquidity like market makers do. Managing the transfer of stock ownership involves settlement processes following trades, which are handled by clearinghouses and other market infrastructure, rather than by the market makers themselves.