Who a Market Maker Is?

The members of Forex market are divided into market makers and market users in accord to their activity and influence on the currency quoting rates.

A market maker is a broker or a dealing center which risks purchasing and keeping on its account securities of a certain issuer with a purpose of selling them. Market makers are operating on over-the-counter market as participants of the conducted deals.

On Forex market, a market maker can be a broker company, for example, which in terms of the agreement with a stock exchange pledges to keep for a discussed period of time the simultaneously drawn orders with the difference between the ask and bid prices by not more than the specified value, in return, the stock exchange provides special allowances to a market maker, for example, for fees payments.

Thus, a market maker is an independent player on the market with a peculiar role. As a rule, such institutions as large banks and financial establishments can be called market makers, which determine the current level of the currency rate by means of significant share of their operations in the total volume of the world market.

The work of market makers consists in:

  • Executing orders of their customers, and only in particular cases involving their own funds.

  • They are the intermediaries collecting the profit from the difference between ask and bid prices of currencies.

  • They sell and buy.

This denotes that a market maker should announce the price of his purchases and sales.

The most profitable prices of selling and buying are automatically listed on top of the list and the computer executes the deals at first instance. A computer replaces the orders and moves the prices in the system faster than a man ever could.

A market usually has its own market makers. Thus, each broker has its personal market maker or a few market makers, the quoting rates of which it offers to its clients. Among the leading market makers are Deutsche Bank, Mizuho Bank, Barclays Bank, PBS, Citi Bank, Chase Manhattan Bank and Union Bank of Switzerland.

Market makers determine the current currency rate by conducting deals with each other and with smaller financial organizations, which also are Forex market participants.

In that way, market makers fix a rate for minor banks, financial establishments and individuals.


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