Market Maker

A Market Maker is a dealer trading for their own account who guarantees liquidity in a given market. Sometimes Market Makers are member firms of an exchange (such as the NASDAQ) for which they provide this service. Market Makers compete with each other to buy and sell the securities that they represent.

For example, there are over 500 member firms that act as NASDAQ Market Makers. Each Market Maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the Market Maker will immediately purchase for or sell from its own inventory, or seek the other side of the trade until it is executed, often in a matter of seconds.