Market StructureDealing DeskDealer
Market Maker
A firm that quotes both a bid and an ask and takes the opposite side of client trades from its own book.
What Market Maker means
A market maker continuously quotes a two-way price and becomes the counterparty to whoever deals on it. In the retail context a dealing-desk broker acts as market maker: when a client buys, the broker sells, and it manages the resulting exposure either by offsetting it against opposing client flow, by hedging with an external provider, or by holding the risk. Revenue comes from the spread and from the net trading result on retained positions.
The model is not inherently abusive and is what allows fixed spreads, guaranteed stops and very small minimum trade sizes to exist. It does, however, create a structural conflict of interest, because a retained client loss is broker revenue. Regulators address this through best-execution obligations, order-handling disclosures and conduct rules. Traders evaluating a market maker should look at published execution statistics, requote and rejection policy, and how spreads behave around news rather than at headline spreads alone.
Worked example
A market maker quoting EUR/USD at a fixed 1.2 pip spread earns about 12 US dollars per standard lot round turn, and may internalise a client buy against another client's sell rather than hedging externally.
Related terms
- B-BookA broker risk model in which client trades are internalised and kept on the firm's own book rather than hedged externally.
- A-BookA broker risk model in which client trades are hedged one-for-one with external liquidity providers.
- ECN (Electronic Communication Network)An electronic venue that anonymously matches buy and sell orders from many participants in a shared order book.
- Fixed SpreadA spread the broker holds constant under normal conditions regardless of underlying market liquidity.
- Best ExecutionThe regulatory duty to take all sufficient steps to obtain the best possible result for a client when executing orders.
Frequently asked questions
What does Market Maker mean in forex trading?
A firm that quotes both a bid and an ask and takes the opposite side of client trades from its own book.
How does Market Maker work in practice?
The model is not inherently abusive and is what allows fixed spreads, guaranteed stops and very small minimum trade sizes to exist. It does, however, create a structural conflict of interest, because a retained client loss is broker revenue. Regulators address this through best-execution obligations, order-handling disclosures and conduct rules. Traders evaluating a market maker should look at published execution statistics, requote and rejection policy, and how spreads behave around news rather than at headline spreads alone.
What is an example of Market Maker?
A market maker quoting EUR/USD at a fixed 1.2 pip spread earns about 12 US dollars per standard lot round turn, and may internalise a client buy against another client's sell rather than hedging externally.
Trade with a regulated broker
Understanding the terminology is the cheap part. The expensive part is choosing a counterparty whose execution, financing and withdrawal behaviour match what the marketing implies. Every broker below has been reviewed with a funded live account, and each review states which legal entity and which regulator applies to the account you would actually open.
Check the licence on the regulator's own register before you deposit — our regulators directory explains what each authority enforces, from leverage caps to compensation limits.