Overview
A market maker is a participant providing buy and sell liquidity to reduce spreads. They profit from the spread and fees. Market makers are essential to liquid markets.
How It Works
Market makers quote both sides of the market, buying and selling to facilitate trades. They manage inventory and risk. AMMs and order books both rely on their behavior.
Why It Matters
Market makers reduce spreads and slippage, improving market quality. They are central to trading venues. Their absence leads to illiquid markets.
Related Concepts
Market makers relate to Liquidity Pools, Order Books, and Spreads. They provide Market depth.