How do they make profit? Can any financial firm become a market maker? Can an individual be a market maker?
In: Economics
A market maker is basically some agent that facilitates purchases between other parties in the market, making money on a difference in the price at which the maker purchases something and which they then sell it to another party (at a basic level, it can be simple arbitrage; it can also involve a market maker taking a commission, or some fee based on the price of the sale, for the service).
The market maker provides public prices at which it will buy and sell a given commodity or financial product, providing a way for producers to liquidate their products and buyers to acquire those products easily.
An individual *could* be a market maker, but this kind of business model tends to require a relatively large amount of capital for the continuous operation that underpins the role; thus it is typical for market makers to be backed by some larger collective institution so that they can operate smoothly.
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