A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the bid–ask spread, or turn.[1] The benefit to the firm is that it makes money from doing so; the benefit to the market is that this helps limit price variation (volatility) by setting a limited trading price range for the assets being traded.
In U.S. markets, the U.S. Securities and Exchange Commission defines a "market maker" as a firm that stands ready to buy and sell stock on a regular and continuous basis at a publicly quoted price.[2] A Designated Primary Market Maker (DPM) is a specialized market maker approved by an exchange to guarantee that they will take a position in a particular assigned security, option, or option index.[3]
^Radcliffe, Robert C. (1997). Investment: Concepts, Analysis, Strategy. Addison-Wesley Educational Publishers, Inc. p. 134. ISBN 0-673-99988-2.
^"Market Makers". Retrieved 17 April 2015.
^"Designated Primary Market Maker (DPM) Program Info". CBoe.org. Archived from the original on 2016-10-22. Retrieved 2014-06-25.
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