Introduction
A Jobber is a dealer in shares or commodities who holds a stock of the asset and trades as a principal. Jobbers are distinguished from brokers, who operate in the same markets but connect buyers and sellers rather than trading for themselves. The modern equivalent of a jobber is known as a market-maker.
Historical Context
Historically, jobbers played a crucial role in the London Stock Exchange before the “Big Bang” financial reforms of 1986. They provided liquidity by continuously quoting buy and sell prices, allowing investors to trade efficiently. Over time, the role evolved into what we now refer to as market-makers.
Types of Jobbers
- Stock Jobbers: Specialists in trading stocks and shares.
- Commodity Jobbers: Focus on trading commodities such as metals, oil, and agricultural products.
- Bond Jobbers: Deal primarily in bonds and other fixed-income securities.
- Currency Jobbers: Operate in the foreign exchange markets.
Key Events
- Pre-1986: Jobbers operated exclusively on the trading floors of stock exchanges.
- 1986 “Big Bang” Reforms: The London Stock Exchange underwent significant changes, abolishing jobbers and transitioning to an electronic trading system.
- Post-1986: Emergence of electronic market-makers who continued the role of jobbers in the new trading environment.
Detailed Explanations
The Role of Jobbers
Jobbers, by acting as principals, took on the risk of holding a position in a security. They profited from the spread between the buy and sell prices, often providing immediate execution to traders.
Market-Makers: The Modern Jobbers
Market-makers, similar to jobbers, provide liquidity by standing ready to buy or sell at publicly quoted prices. They are essential in ensuring a smooth, efficient market.
Mathematical Models
Spread Calculation Formula
Where:
- Ask Price is the price at which the jobber (or market-maker) sells the asset.
- Bid Price is the price at which the jobber (or market-maker) buys the asset.
Charts and Diagrams
graph TD;
A[Jobber/Market-Maker] -->|Buyers| B[Bid Price]
A[Jobber/Market-Maker] -->|Sellers| C[Ask Price]
Importance and Applicability
Jobbers were essential in maintaining market liquidity and price stability. In the modern context, market-makers continue to fulfill this role, ensuring that financial markets remain robust and efficient.
Examples and Considerations
- Example: A market-maker in the NASDAQ who continually provides quotes for shares of Apple Inc.
- Considerations: The spread set by market-makers impacts the transaction cost for investors.
Related Terms
- Broker: An intermediary who connects buyers and sellers without taking positions themselves.
- Market-Maker: The contemporary equivalent of a jobber, providing liquidity in various financial instruments.
- Liquidity Provider: Another term for entities that fulfill the role of ensuring market liquidity, similar to jobbers and market-makers.
Comparisons
- Jobber vs Broker: Jobbers trade on their account, whereas brokers act as intermediaries.
- Jobber vs Market-Maker: Market-makers are the modern evolution of jobbers, often operating electronically.
Interesting Facts
- The term “jobber” has largely fallen out of use since the 1980s, replaced by “market-maker”.
- Jobbers were once integral to the floor trading systems of major stock exchanges.
Inspirational Stories
One notable story is of Sir Nicholas Winton, a London stockbroker who, while not directly related to the financial term, exhibited remarkable humanitarian efforts that inspire ethical practices and responsibility, qualities valuable in all professions.
Famous Quotes
- “Buy low, sell high.” – Traditional advice reflecting the core objective of jobbers.
Proverbs and Clichés
- “Time is money.” – A saying emphasizing the importance of quick and efficient trades in a jobber’s work.
- “The market always bounces back.” – Encourages perseverance in financial trading.
Expressions, Jargon, and Slang
- [“Spread”](https://financedictionarypro.com/definitions/s/spread/ ““Spread””): The difference between bid and ask prices, crucial for jobber profits.
- [“Liquidity”](https://financedictionarypro.com/definitions/l/liquidity/ ““Liquidity””): The ease with which assets can be bought or sold, directly influenced by jobbers.
FAQs
What happened to jobbers after the 1986 'Big Bang' reforms?
How do market-makers differ from brokers?
References
- London Stock Exchange history articles.
- Financial market textbooks detailing the evolution of jobbers to market-makers.
Summary
A jobber was a vital player in the financial markets, providing liquidity and facilitating trade before the electronic age. Though the title has been retired, their legacy continues through market-makers, who ensure that today’s financial markets operate smoothly and efficiently.
This article provides a comprehensive overview of the role and evolution of jobbers, ensuring readers have a well-rounded understanding of their historical and modern significance in financial markets.
