Market maker

A market maker places limit orders on both sides of the order book at once, offering to buy slightly below and sell slightly above the market price. When others trade against those quotes, the maker earns the bid-ask spread. Professional firms do this with automated systems across many exchanges, adjusting quotes in milliseconds.

Centralized exchanges sign agreements with market makers and often pay them fee rebates to keep spreads tight. New token projects hire market makers ahead of a listing, sometimes paying them with token loans and call options, an arrangement that has drawn scrutiny when the terms encouraged selling. An AMM is different: it replaces the human maker with a smart contract and a liquidity pool that quotes prices by formula.

Market makers improve liquidity but can pull their quotes in turbulent moments, leaving books thin just when traders need them. Because they hold inventory they also carry price risk, and some firms have been charged by authorities for wash trading on behalf of clients.