Market Maker

A market maker is a broker (or liquidity provider) that quotes both buy and sell prices for a financial instrument, effectively "making" the market for traders. They profit from the spread — the gap between their bid and ask prices. When you trade with a market maker, they're taking the opposite side of your trade.

The inherent conflict of interest is obvious: if you lose, they win. Regulated market makers mitigate this through hedging (offsetting client trades in the wider market) and through regulatory requirements like best execution policies. Still, the business model means the broker benefits financially from your losses, which many traders find uncomfortable.

In fairness, market makers provide valuable services: guaranteed execution (your order always gets filled), fixed or tight spreads during normal conditions, and no commissions in many cases. For small retail traders, the practical difference between a well-regulated market maker and an ECN broker is often minimal. The bigger concern is choosing a properly regulated broker regardless of model.