Understanding Market Makers
A market maker is a company that is always ready to buy or sell a financial asset at an openly quoted price on a long-term basis. Market makers participate in transactions directly as either the seller or buyer. To a large extent, they determine the buy or sell price for specific trading instruments. The main role of a market maker is to provide liquidity, or create opportunities for other market participants to buy or sell a fairly large range of stocks, currencies, futures and other trading instruments at an openly quoted price. Because they always act as the counterparty to a transaction, market makers are risking their own funds; for this reason they engage in various strategies to insure (hedge) against losses.
Forex market makers are large financial companies and banks whose transactions make up a significant portion of the total volume of Forex trading, giving them influence on currency exchange rates. Large international banks that trade currency worth tens of billions of U.S. dollars on a daily basis are usually referred to as market makers.
The largest and best known market makers include: Deutsche Bank, Barclays Capital and UBS AG. A bank’s share in overall trading volume is more important than its total capital in determining whether or not the bank is a market maker. In other words, what matters is a bank’s actual ability to influence movement on the market by offering its buy and sell prices. Even small and medium-sized financial companies can be Forex market makers. As a market maker, our company provides its partners and clients with trading services on the Forex and financial markets.