What it is
Market makers continuously quote both a bid price (the price they are willing to buy at) and an ask price (the price they are willing to sell at) for a given security. By doing so, they ensure that there's always a buyer or seller available, facilitating smooth trading and reducing price volatility. They profit from the bid-ask spread, the small difference between their buying and selling prices.
Market makers are crucial to the functioning of modern financial markets, often discussed in relation to market liquidity, efficiency, and the execution of trades. News may cover their role in high-frequency trading, their interaction with payment for order flow, or their influence during periods of extreme market volatility. Understanding their function helps explain how orders are filled and why bid-ask spreads exist.
Why it matters
Market makers ensure liquidity, enabling you to buy or sell stocks readily. Their actions influence the bid-ask spread and trade execution quality.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice