A firm or individual that provides liquidity to financial markets by continuously quoting both bid and ask prices for securities and standing ready to buy or sell at those prices. Market makers profit from the bid-ask spread.
Compound from 'market' (from Latin mercatus, meaning trade or marketplace) and 'maker' (from Old English macian, meaning to construct). Term emerged in the 1960s as electronic trading systems required designated liquidity providers.
Market makers are like the ultimate middlemen - they make money on every transaction by buying low and selling high simultaneously, but they also take the risk of holding inventory when nobody else wants to trade!
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