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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
Continuously offering to both buy and sell a stock, earning the small gap between the two quoted prices — the bid-ask spread.
Why It Matters
A market maker posts a price to buy (the bid) and a price to sell (the ask) at the same time, standing ready to trade with whoever comes along. Its profit is the spread between those two prices, repeated across huge volume. In return it provides liquidity — someone to trade against — which is part of why your market order fills instantly. Modern market making is overwhelmingly automated and closely tied to high-frequency trading.
Key Points
- Quotes both a buy and a sell price simultaneously
- Earns the bid-ask spread in exchange for providing liquidity
- Now almost entirely automated
Related Terms
Common Questions
Continuously offering to both buy and sell a stock, earning the small gap between the two quoted prices — the bid-ask spread. A market maker posts a price to buy (the bid) and a price to sell (the ask) at the same time, standing ready to trade with whoever comes along. Its profit is the spread between those two prices, repeated across huge volume.
A market maker posts a price to buy (the bid) and a price to sell (the ask) at the same time, standing ready to trade with whoever comes along. Its profit is the spread between those two prices, repeated across huge volume. In return it provides liquidity — someone to trade against — which is part of why your market order fills instantly. Modern market making is overwhelmingly automated and closely tied to high-frequency trading.
Quotes both a buy and a sell price simultaneously
Earns the bid-ask spread in exchange for providing liquidity
Now almost entirely automated