Market Maker

A market maker is a financial intermediary or institution that plays a crucial role in facilitating trading and maintaining liquidity in financial markets. Market makers create a market for specific financial instruments, such as stocks, bonds, currencies, or derivatives, by providing continuous bid and ask prices. These bid and ask prices allow traders to buy or sell assets at any time, even if there are no immediate buyers or sellers in the market.

Market makers accomplish this by holding an inventory of the assets they are willing to buy or sell. They profit from the difference between the bid and ask prices, known as the “spread.” The bid price is the price at which the market maker is willing to buy the asset, and the ask price is the price at which they are willing to sell it.

By offering liquidity and enabling immediate execution of trades, market makers play a crucial role in ensuring the efficiency and smooth functioning of financial markets. They also help narrow the bid-ask spread, reducing trading costs for investors

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