Market maker

A market maker is a financial entity that provides liquidity by continuously quoting both a bid price (to buy) and an ask price (to sell) for a financial instrument. They act as a counterparty to trades, ensuring that buyers and sellers can always execute their orders. Their primary function is to maintain an orderly market and facilitate trading activity.

For retail traders, market makers profit from the bid-ask spread, which is the difference between their buying and selling prices. This spread is a direct transaction cost for every trade. Some market makers operate a dealing desk, which can lead to conflicts of interest as they may take the opposite side of a client's trade.