A market maker is an individual, a company or liquidity provider that quotes both buy and sell price of commodity or financial instrument held in inventory with a hope to gain profit on bid-ask spread. According to the definition of the US Securities and Exchange Commission, “market maker is a firm that stands ready to buy and sell stock on a regular and continuous basis at a publically quoted price.
In currency exchange, many banks and foreign exchange trading firms are market makers. The market maker, buy and sell from its client and are compensated by means of facilitating trade, reducing transaction cost, bid-ask price difference and by providing the service of liquidity.
A brokerage house is most common type of market maker that facilitate buy and sell trade to investor and traders in a struggle to retain financial market liquid. The market maker quote both bid and ask price at which they buy and sell securities.
They also quote trading volume and frequency of time in which they are willing to trade. During all market outlooks, the market makers stick to these constraints at all the time. Even when market become volatile or erratic, market makers remain self-controlled in order to endure easing smooth transactions.