Market Maker

A market maker is a broker that provides liquidity by quoting both buy and sell prices and is ready to take the opposite side of client trades internally rather than routing them to external liquidity. Market makers profit primarily from the spread they set between bid and ask, and sometimes from client losses when clients are net unprofitable. This can create conflicts of interest because the broker may benefit when the client loses, though regulated market makers generally operate with rules that manage this conflict.

Market makers offer advantages including guaranteed execution (since they create their own liquidity), fixed spreads that do not widen during volatile moments, and often instant order fills. Disadvantages include potential for wider spreads than non-dealing-desk brokers, possible requotes during fast markets, and the inherent conflict where the broker may profit from client losses. Not all market makers are the same, and well-regulated ones under strict jurisdictions like the FCA, ASIC, or CFTC have operational limits that reduce abuse.

For example, a market maker might offer 1.8 pip fixed spreads on EUR/USD, meaning every trade costs about $18 per round-turn standard lot. A comparable ECN broker might offer 0.3 pip variable spreads with $7 commission, for a total cost of about $10 per round-turn. The ECN is cheaper on 100 trades by roughly $800. However, the market maker may guarantee fills during news events when ECN spreads blow out to 10 pips or more, making each model suit different trading styles.

In copy trading, broker type affects whether subscriber results match the master. SteadyFlowFX's 9 algorithms trade 8 currency pairs optimally with brokers offering low cost and reliable execution. The verified Myfxbook 1.73 profit factor was achieved with specific broker conditions that subscribers should try to match. Understanding market makers versus ECNs helps subscribers choose a broker model aligned with their priorities and with the strategy's execution needs.