Market Maker (Equities)
A firm or individual that continuously quotes buy and sell prices for a stock, providing liquidity and enabling smooth trading.
An equity market maker is a broker-dealer or designated specialist that stands ready to buy and sell a specific stock at publicly quoted prices. By committing to two-sided quotes, market makers ensure there is always a counterparty when you want to trade.
On the NYSE, Designated Market Makers (DMMs) are assigned to specific stocks and have obligations around maintaining fair and orderly markets, especially at the open and close. Electronic market makers (like Citadel Securities, Virtu) dominate Nasdaq and off-exchange venues.
Market makers profit from the bid-ask spread — buying at the bid and selling at the ask repeatedly. In return, they absorb inventory risk when order flow is one-sided. Their willingness to hold inventory is what prevents stocks from gapping violently on moderate news.
Related Terms
After-Hours Trading
Stock trading that occurs after the official 4:00 PM ET close. Lower liquidity and wider spreads; major news like earnings often hits here.
IntermediateCircuit Breaker (Market-Wide)
An exchange-wide trading halt triggered by a sharp S&P 500 drop, pausing all US stock trading to curb panic selling.
AdvancedFloat
The number of shares freely available for public trading, excluding insider-held and restricted shares.
IntermediateHalt (LULD)
A mandatory pause in trading when a stock's price moves too far, too fast. LULD bands are set as a percentage of the prior reference price.
AdvancedNYSE
The world's largest stock exchange by market capitalization, located at 11 Wall Street in New York City.
BeginnerPre-Market Trading
Trading before the 9:30 AM ET open, typically from 4:00 AM to 9:30 AM ET. Used to react to overnight news, data, and earnings.
Intermediate