Citadel Securities: What Is a Market Maker?

Market makers serve as the essential backbone of the modern financial system by providing continuous liquidity through the real-time buying and selling of financial instruments. Historically, trading required brokers to physically search for counterparties in taverns or on exchange floors, a process that often led to failed deals if a match wasn't found. The transition to decentralized, electronic trading via platforms like NASDAQ shifted this responsibility to market makers, who now utilize sophisticated technology and risk management to execute billions of orders in fractions of a second. By acting as a constant counterparty, these intermediaries ensure immediate trade execution, lower transaction costs, and tighter price spreads. This efficiency benefits a broad spectrum of participants beyond individual traders, including pension funds, non-profit endowments, and companies raising capital, ultimately making global markets more transparent and cost-effective for all investors.