Finance glossary
Market Maker
Definition
A firm that provides liquidity by continuously quoting buy and sell prices.
Market makers stand ready to buy and sell a security at publicly quoted prices, earning the bid-ask spread as compensation. They provide liquidity that lets other participants trade quickly. By absorbing temporary imbalances, they reduce volatility, though they take on inventory risk.
In a sentence
The market maker quoted both a buy and a sell price all day, pocketing the spread in between.
Get a word like this every morning
Word of the Day on your Home Screen, with quizzes and flashcards. Get the app →