Market maker
A market maker quotes EUR/USD 1.1000/1.1002. Buying EUR 100,000 from one party at Bid and selling the same amount to another at Ask gives a USD 20 gross difference only if both trades fill at those prices. Unmatched inventory can instead gain or lose value.
Quotes and inventory
Two-way quoting makes trading interest available under defined size and access conditions. A market maker manages inventory, funding and adverse price movements as well as quote risk. It can change quoted prices or size subject to its obligations; the visible spread is not a guaranteed realised margin on every client trade.
Hedging and internalisation
Market making can coexist with external hedging, matching client flows or retained net risk. Fixed versus variable spreads do not identify these policies. Acting as principal and managing risk through A-Book or B-Book are separate dimensions. Identify the legal entity and the contractual counterparty before drawing conclusions from an account label.
Evaluate conduct and execution
Assess disclosures, conflicts, pricing, reject handling and confirmed fills with comparable samples. A different quote from another source or a stop followed by a reversal does not alone establish manipulation. Equally, the economic function of market making does not exempt a provider from applicable obligations. Evaluate the actual arrangement rather than assume either perfect execution or misconduct.
FAQ
Must a market maker offer fixed spreads?
No. Its pricing can be variable. Read the particular price and execution terms.
Does a market maker necessarily keep every trade unhedged?
No. It can offset flows or hedge externally while remaining the legal counterparty.
