Glossary · Defined term
Market maker
A market maker is a firm that continuously quotes buy and sell prices, providing the liquidity other investors trade against.
Last updated Oct 2, 2026
What it means
A market maker is a firm that continuously quotes both buy and sell prices for a security, standing ready to trade with anyone who shows up. By always posting a bid and an ask, market makers supply the liquidity that lets other investors trade instantly instead of waiting for a counterparty. On the NYSE, designated market makers have formal obligations to maintain orderly trading in their assigned stocks.
Market makers profit mainly from the bid-ask spread, buying at the bid and selling at the ask many times a day. They also take on risk: when news breaks, they can be left holding positions that move against them, so they adjust quotes rapidly and hedge their exposure. Competition among market makers is what keeps spreads tight in heavily traded stocks.
For ordinary investors, market makers are mostly invisible plumbing, but their presence is felt in every trade. A stock with active market makers fills market orders quickly at fair prices; a stock without them can sit with stale quotes and punishing spreads.
An example
For illustration, a market maker quotes a stock at a $50.00 bid and a $50.02 ask all day. Each time a buyer and a seller both trade with the market maker, it captures the 2-cent spread, repeating the round trip hundreds of times.