A “jobber” is a term historically used in the United Kingdom to describe a type of market maker who traded securities on their own account. While the word may sound unfamiliar to many modern traders, understanding the role of jobbers offers valuable insight into how financial markets, especially stock exchanges, evolved over time.

In the early days of the London Stock Exchange, jobbers were professional traders who provided liquidity by continuously buying and selling shares from their own inventory. Unlike brokers, who acted as intermediaries executing trades on behalf of clients, jobbers operated as principals. This means they assumed the risk of holding securities and profited from the spread between the buying price (bid) and the selling price (ask). In essence, jobbers helped ensure that investors could buy or sell shares promptly without waiting for a direct counterparty.

The jobber’s profit relied heavily on the bid-ask spread. This spread is the difference between the price at which the jobber was willing to buy a stock (bid) and the price at which they were willing to sell it (ask). For example, if a jobber quoted a bid price of £50 and an ask price of £50.10 for a stock, their spread was £0.10 per share. The jobber aimed to buy at the bid and sell at the ask, capturing that difference as profit, minus transaction costs and risks associated with price fluctuations.

Formula: Profit per trade = (Ask price – Bid price) × Number of shares traded

A real-life example of a jobber’s activity might be seen in the foreign exchange (FX) market today, although the term itself is outdated. Consider a currency market maker quoting EUR/USD at 1.1200/1.1202. The market maker (similar to a jobber) buys euros at 1.1200 USD and sells at 1.1202 USD. By continuously providing these quotes and executing trades, the market maker earns the spread, facilitating liquidity for other traders.

One common misconception about jobbers is that they were merely brokers or agents. In reality, jobbers traded on their own account and took on significant risk. Another misunderstanding is that jobbers always profited from their trades. Market volatility meant that holding inventory could lead to losses if prices moved unfavorably before they could offset their positions.

The jobber system in the UK ended with the Big Bang reforms of 1986, which deregulated financial markets and introduced electronic trading platforms. These reforms merged the roles of jobbers and brokers into a more unified system of market making and brokerage, reflecting global trends toward greater market transparency and efficiency.

Related queries people often search for include “What is a market maker?”, “Difference between broker and jobber”, and “How do market makers profit?” Understanding the role of a jobber helps clarify these concepts, especially in historical context. While the term is rarely used today, the concept lives on in modern market makers who perform similar functions in various asset markets like stocks, indices, CFDs, and FX.

In summary, jobbers were essential players in the historical UK securities market, acting as market makers who traded for their own account to provide liquidity and price stability. Their operations hinged on capturing the spread between bid and ask prices, a principle still fundamental to market making today. Recognizing the jobber’s role deepens one’s appreciation of how modern trading ecosystems have been shaped and how liquidity is maintained across financial markets.