Market Makers

Market makers operate as one of two complementary roles in liquidity. Market makers are passive market participants. Market makers are passive participants in the order book. Price moves when takers consume liquidity that makers have supplied. Market makers provide liquidity in the market. Market makers place both buy and sell limit orders above and below the current market price. Market makers withdraw from the order book in the first milliseconds after a news release. Market makers post buy or sell offers at specific prices. Market makers exit passive liquidity positions immediately after a news event. Market makers earn money from the bid-ask spread on facilitated transactions. Market makers populate the order book with bids and offers. Market makers across all asset classes have materially reduced their willingness to post inventory in response to an unusually high volume of toxic order flow. Options market makers actively manage delta hedging strategies that create price-moving flows. Market makers do not initiate trades. Market makers wait for other participants to act on their posted offers. Market makers continuously adjust hedges when gamma exposure changes as prices move…