GlossaryIntermediate
Market Maker
A participant who places both buy and sell orders on an order book to provide continuous liquidity, generally profiting from the spread.
A market maker is a participant who places both buy and sell orders on an exchange's order book, providing continuous liquidity for other traders to transact against, and generally aiming to profit from the small spread between its own buy and sell prices rather than from directional price movement.
This is a distinct concept from an automated market maker (AMM), which provides liquidity algorithmically through a pooled-liquidity formula rather than an individual participant actively placing and managing orders on a traditional order book.
Examples
- A market maker profits primarily from capturing the bid-ask spread across many trades, not from predicting price direction.
- A centralized exchange's order book depth depends heavily on active market makers continuously providing buy and sell orders.