What is a Market Maker? An introduction

A “Market Maker” is a brokerage firm, or a dealer that accepts the risk of owning a number of certain stocks, of a certain value with the purpose of facilitating the trades between its patrons.

Market Makers offer access to the great international markets and facilitates trades. It takes quota out of the market and offers it to its customers, forcing them to offer a constant buying price and selling price. A Market Maker wins from the quota difference. As such, it is the bridge between the capital market and the investor or trader. The market existence allows the growth of liquidity of this market, because, an investor that wishes to buy, EUR for example, and puts in a buying order, won’t have to wait for a buyer in order to sell the euro quantity which he desires.

The order is then taken and executed by the market maker and it will take a part of the risk and will then find a euro seller in order to close the trade. As I have mentioned before, the Forex market is the most liquid market in the world and practically situations in which the order cannot be executed instantaneously are very rare occurrences.

Market Maker

Illustration showing the way in which Market Makers act as a bridge between the Investor and the Market.


A further quick description as seen on Wikipedia:

Market makers that stand ready to buy and sell stocks listed on an exchange, such as the New York Stock Exchange or the London Stock Exchange, are called “third market makers.” Most stock exchanges operate on a “matched bargain” or “order driven” basis. When a buyer’s bid price meets a seller’s offer price or vice versa, the stock exchange’s matching system decides that a deal has been executed. In such a system, there may be no designated or official market makers, but market makers nevertheless exist.”


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