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Market Maker

A market maker is a financial intermediary that quotes bid and ask prices to buy or sell assets, facilitating liquidity in financial markets. They buy and sell large amounts of a particular asset to ensure smooth running of the markets. Market makers can be individuals or institutions, but they are typically large institutions due to the quantity of assets needed to enable the required volume of trading.


Market makers make money by maintaining a spread on the assets they enable traders to trade. For instance, they may offer to purchase an asset at a lower price (ask price) and sell it at a higher price (bid price), making a profit on the difference. Market makers play an important role in maintaining market stability, but they are exposed to risk, particularly during volatile market conditions.


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