What is 'Market Making'?

What is 'Market Making'?

Approach: Describe the act of providing liquidity by quoting both buy and sell prices.

The process of providing liquidity to a market by simultaneously quoting a bid (buy price) and an ask (sell price). The profit comes from the spread between the two prices.

Follow-up: What is inventory risk in market making?

Key concepts: bid-ask spread, liquidity, inventory risk.