In answer to your questions, relating specifically to the London markets, and broadly speaking......
1. Market makers (in equities) in London tend to be the major investment banks such as Morgan Stanley, Goldman Sachs, Merrill Lynch, UBS, Citi, Deutsche Bank etc.....
2. Market makers will quote you a two way price in a line of stock in a certain size. i.e ABC plc 825-850. in 100,000.
This means you can sell up to 100,000 ABC shares at £8.25 per share, or buy up to 100,000 ABC shares at £8.50 per share.
Market makers do not charge commission, but make their profits from the difference between the selling price (the bid) and the buying price (the offer). The differnece is known as the spread. In effect they are trading a "book". An individual employee of an institution working as a market-maker will make prices in a number of stocks, normally within his specialist sectors (i.e oils, financials, tech stocks etc)
Note that you as an individual cannot deal directly with a marketmaker...you will neeed to go through a broker who in turn will deal with the marketmaker.
3. Yes
4. The answer to this question would take several hundred pages to explain....so I will give you the very basics!
Ultimately, prices in equities (and almost everything else), depend upon supply and demand. If there are more buyers than sellers, the price goes up, if there are more sellers than buyers the price goes down.
You therefore need to ask yourself what events would cause people to buy or sell a specific share, and this is why having access to real-time financial (and sometimes non-financial) news is so important to investors, and why you see dealing rooms full of Bloomberg and Reuters screens continually pumping out global news.
Company news
The share price will be affected by news specific to that company. E.g the reporting of its results, the introduction of a new product, the resignation of the chief executive, a takeover approach etc (e.g the recent oil find by Cairn Energy saw its share price surge)
Economic news
The release of official figures such as unemployment, inflation, trade deficits (or surpluses), house prices etc will have an effect on companies and therefore their share prices. For example, if inflation increases rapidly and unexpectedly, interest rates will need to rise. A rise in interst rates will make borrowing by companies more expensive and will effect their profits. Additionally, investors might be attracted to fixed income products (bonds / gilts) and away from equities, thus resulting in a fall in share prices.
Political news
Government instabilty, war, key government resignations will also affect general stock prices. The resignations of Nigel Lawson, Norman Lamont, and the exit from EMU, the Gulf wars are all examples.
In terms of the process of changing prices, remember that in liquid stocks there may be a dozen market makers quoting prices.
Using the example of ABC plc again...
Market maker 1 ...825-850
Market maker 2.....835-860
Market maker 3.....825-850
Market maker 4.....815-840
The "touch" price in the market (best bid / best offer) is 835-840. If you are a seller of stock you would go to market maker 2, if you were a buyer of stock you would go to marketmaker 4.
Market maker 2 is clearly short of stock and he wants more ABC shares. By quoting the highest bid price, he will attract sellers and be able to add more stock to his book. On the other hand market maker 4 is clearly long of stock, and therefore tries to attract buyers with his best offer of 840.
Market makers will continually change and update their quotes depending upon the positions they run, and their interpretation of market news.
Their quotes are disseminated across trading screens across the financial community.
5. If you are a private punter buying 100 shares in Glaxo, the answer is no. When Stock Markets first came into existence, most transactions were done almost entirely by private individuals, Today the volume comes from financial institutions such as pension funds and investment managers. Private client business only accounts for a small portion of business. In a London listed liquid stock (FTSE) you would literally have to deal in considerable size (10's of millions) to have a direct impact on the shareprice.
If however, you were a private punter dealing in futures contracts with a spreadbet sompany (in effect a marketmaker), then you may find that trading £100 / point or more on FTSE will have an impact on their quote.
