Market Maker

A market maker is a firm, trading desk or automated strategy that continuously quotes both a bid and an ask on a market, standing ready to buy from sellers and sell to buyers. By keeping resting limit orders on both sides of the order book, market makers supply the liquidity that lets other participants trade instantly, and they earn the bid-ask spread plus any maker fee rebate in return. Their inventory risk grows when prices move sharply, so they widen quotes or step back during volatility, which is why spreads blow out in stressed markets. In decentralised finance the same role is played algorithmically by automated market maker pools.