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

The market maker still makes a small profit from the one-cent spread. Lisa Beilfuss, WSJ, "Why ‘Free Trading’ on Robinhood Isn’t Really Free," 9 Nov. 2018 That risk leads market makers to be cautious and quote wider spreads. Lisa Beilfuss, WSJ, "Why ‘Free Trading’ on Robinhood Isn’t Really Free," 9 Nov. 2018 The currencies slumped to the weakest levels in months as few local market makers were around to offer liquidity at a time when the dollar was surging across the board. Adrian Krajewski,, "East European Currencies Whipsaw on Dollar Gains, EU Budget," 2 May 2018 The largest participants in the stock market are electronic market makers such as Citadel Securities and Virtu Financial Inc., which trade billions of U.S. shares a day. Dave Michaels, WSJ, "Machine Trading Needs More Oversight, Departing SEC Official Says," 21 Dec. 2018 Such a design would benefit market makers, the firms that facilitate trading by continuously quoting prices for stocks. Alexander Osipovich, WSJ, "New ‘Speed Bump’ Planned for U.S. Stock Market," 31 Aug. 2018 That is good for nonbank market makers like Citadel Securities, independent research houses, or boutique merger-and-acquisition advisers, such as Evercore. Paul J. Davies, WSJ, "The New Winners and Losers in Investment Banking," 15 Apr. 2018 Cry Tough Even brand name issuers are having trouble lining up lead market makers. Rachel Evans,, "There’s a Shortage of Expert ETF Traders Who Make the Market Tick," 23 May 2018 Without a lead market maker a fund’s bid-ask spread can balloon. Rachel Evans,, "There’s a Shortage of Expert ETF Traders Who Make the Market Tick," 23 May 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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Last Updated

23 May 2019

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The first known use of market maker was in 1962

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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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