Market Maker
A firm or individual that provides liquidity by continuously quoting buy and sell prices for securities.
Definition
A market maker is a firm or individual that actively quotes two-sided markets in a particular security, providing bids (buy prices) and asks (sell prices) along with the market size of each. Market makers profit from the bid-ask spread — the difference between the price they buy at and the price they sell at. They provide essential liquidity to financial markets, ensuring that buyers and sellers can always find a counterparty. Major market makers include Citadel Securities, Virtu Financial, and Jane Street. On the NYSE, designated market makers (DMMs) are responsible for maintaining fair and orderly markets in assigned stocks. In crypto, automated market makers (AMMs) like Uniswap use algorithms and liquidity pools instead of traditional order books.
Related Terms
Spread
The difference between the bid (buy) and ask (sell) price of a security.
MarketsLiquidity
The ease with which an asset can be converted to cash without significantly affecting its price.
TradingMarket Order
An order to buy or sell a security immediately at the best available current price.
TradingLimit Order
An order to buy or sell a security at a specific price or better.