Market Maker

Category: infrastructure

A firm or individual that stands ready to buy or sell securities at specified prices, ensuring market liquidity.

Market makers bridge the gap between buyers and sellers. They maintain the order book, absorbing temporary imbalances in supply and demand. They don’t "bet" on the stock’s direction; they make their profit by capturing the tiny bid-ask spread across millions of shares traded every day.

Common Examples

• Market makers provide the vital liquidity that allows institutional desks to enter large positions without moving the market price significantly.
• During the flash-crash event, market makers pulled their quotes from the order book, causing the liquidity vacuum that worsened the price free-fall.