Market Maker
A participant that continuously quotes both a bid and an ask, standing ready to buy or sell and earning the spread.
Formula
Gross Earnings = Bid-Ask Spread x Volume Transacted, less losses from adverse price moves on inventory
Unit
₹
In depth
A market maker supplies immediacy: it takes the other side of your trade now so you do not have to wait for a natural counterparty. The spread is compensation for two risks — holding inventory that can move against it, and trading with someone who knows more than it does. When information risk rises, spreads widen, which is why quotes deteriorate exactly around announcements. Market makers are obliged to quote in some segments, notably ETFs and certain derivatives in India, which is what keeps those instruments tradable at all.
Worked example
Quoting ₹249.90 bid and ₹250.10 ask, a market maker that buys and sells 10,000 shares in a session earns roughly 0.20 x 10,000 = ₹2,000 gross. A single 1% adverse move on 5,000 shares of leftover inventory costs ₹12,500 — several sessions of spread.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Market Maker” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.