market maker


Definition of market maker

: an intermediary in a stock exchange who controls buy and sell orders (as by purchase and resale) for a particular stock or group of stocks

Examples of market maker in a Sentence

Recent Examples on the Web That has long been the main bone of contention from the primary dealers (official market makers) that compromise the bulk of the Treasury Borrowing Advisory Committee. Washington Post, "100-Year Treasuries Are The Final Frontier," 30 Aug. 2019 Those broker-dealers -- probably market makers such as high-frequency trading firms -- paid Robinhood for executing the trades with them, FINRA said. Matt Egan, CNN, "Robinhood trading app fined for 'failures'," 19 Dec. 2019 Citadel Securities, one of the biggest market makers in the world, has hired the machine-learning expert as a senior fellow and head of principal research. John Detrixhe, Quartz, "Financial trading firms are wooing top mathematical brains with “exciting” datasets," 23 Sep. 2019 The exchange will work with the company’s bankers and the designated market maker, Citadel Securities, to get a sense of supply and demand and then open trading based on what the group believes will be a stable price. Sonali Basak And William Hobbs | Bloomberg, Washington Post, "What a ‘Direct Listing’ Is, and Why Banks Are Nervous," 20 June 2019 Newsletter Sign-up But compiling the bonds included in the trades, negotiating a price, and executing the entire portfolio can be cumbersome for investors, in part because there isn’t a uniformly accepted protocol among portfolio market makers. Matt Wirz, WSJ, "Bond Investors Get New Tools to Speed Up Trading," 19 June 2019 The brokerage firm founded by financier Brian Winterflood was one of the original market makers when AIM started. Washington Post, "Settling the Wild West: Companies Put Down Stakes on U.K.’s AIM," 17 May 2019 Slack surprised investors and market makers alike by opening with formidable trading volume. Anne Sraders, Fortune, "Slack Goes Public: What We Learned From Its Direct Listing Debut," 20 June 2019 Turbulent markets have helped Virtu, a market maker that continuously quotes stock values. Steven Russolillo, WSJ, "Stock Exchanges Are Beating Other Stocks," 3 Dec. 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'market maker.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of market maker

1962, in the meaning defined above

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The first known use of market maker was in 1962

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Last Updated

26 Jan 2020

Cite this Entry

“Market maker.” The Dictionary, Merriam-Webster Inc., Accessed 26 January 2020.

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market maker


Financial Definition of market maker

What It Is

A market maker is a person or brokerage house that is always prepared to buy and sell securities in order to provide liquidity to the markets.

How It Works

By holding a disproportionately large number of a given security, a market maker is able to satisfy a high volume of market orders in a matter of seconds at competitive prices. If investors are selling, market makers are supposed to keep buying, and vice versa. They are supposed to take the opposite side of whatever trades are being conducted at any given point in time.

In this sense, market makers, as the name suggests, are able to satisfy the market demand for a security and facilitate its circulation. The Nasdaq, for example, relies on market makers within its network to ensure efficient trading.

Market makers profit through the market maker spread, not by betting on the direction of the security's price. They are supposed to buy or sell securities according to what kind of trades are being placed, not according to whether they think prices will go up or down.

Why It Matters

In contrast to conventional brokers, marker makers assume a high level of risk because of the high number of units they hold (their inventory). Market makers are entrusted with promoting market efficiency by keeping markets liquid. To ensure impartiality for the benefit of their clients, brokerage houses who act as market makers are legally required to separate their market making activities from their brokerage sales operations.

Source: Investing Answers

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