A market maker or liquidity provider is a company or an individual that quotes both a buy and a sell price in a tradable asset held in inventory, hoping to make a profit on the difference, which is called the bid–ask spread or turn.
[citation needed] As of October 2008,[update] there were over two thousand market makers in the United States,[4] and over one hundred in Canada.
They typically do not receive the trading advantages a specialist does, but they do get some, such as the ability to naked short a stock, i.e., selling it without borrowing it.
[8] Examples of New York market makers are Optiver, Jane Street Capital, Flow Traders, IMC, and Virtu Financial, according to Article 17(13) of Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012.
Prior to the Big Bang, jobbers had exclusive rights of market making on the LSE.
The Frankfurt Stock Exchange (FWB) runs a system of market makers appointed by the listed companies.
[11] Designated Sponsors secure higher liquidity by quoting binding prices for buying and selling the shares.
Liquidity provision in a decentralized network protocol, such as the trading or transacting of a cryptocurrency on an exchange, works rather differently.
[13] Decentralized exchanges offer trading discounts for high-volume traders in order to encourage companies and individuals to provide liquidity as unofficial market makers.
[14] Decentralized markets fall outside of the regulatory reach of traditional courts with jurisdiction in defined geographic boundaries.