Market maker
Also called: market makers, liquidity provider
A trader or firm that continuously quotes both buying and selling prices, earning the spread for providing liquidity.
Market makers take on the risk of holding inventory as prices move. Many are firms using automated systems. In stressed markets, they may widen quotes or withdraw, which is one reason liquidity disappears when it is most needed.
Learn more in these lessons
- Market microstructureWhat really happens when an order meets the market?
- Algorithmic tradingWhat is algorithmic trading, and can an individual buy the same edge?
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