A market maker is a participant—often a broker, bank, or specialized trading firm—that continuously provides buy and sell prices for a financial instrument, thereby ensuring tradability and liquidity.
The market maker earns from the difference between the bid and ask price (the spread). Unlike the ECN model, where orders are matched directly between market participants, a market maker acts as the counterparty to client trades.
This can create a potential conflict of interest, as the market maker may benefit from client losses. However, regulated market makers are subject to oversight and transparency requirements.
In foreign exchange trading, the market maker model remains widely used and provides access to tradable prices, especially in less liquid markets.
