Market maker
Principles of Finance glossary · Valuation of Bonds & Stocks
Definition
A dealer who quotes both bid and ask prices and stands ready to trade at those prices.
Market maker in plain English
A market maker is like a shop that is always open to both buy and sell the same thing. They post two prices at once: the price they'll buy from you (the 'bid') and the slightly higher price they'll sell to you (the 'ask'), and they promise to actually trade at those prices. Think of a currency-exchange booth at the airport — it will hand you euros OR take your euros back any time, pocketing the small gap between its two prices. That gap is how the market maker earns money, and their willingness to always trade is what lets you buy or sell instantly instead of waiting to find a matching partner.
Learn these first
Related Principles of Finance terms
Principles of Finance practice questions · Principles of Finance flashcards · Principles of Finance study guide