Market maker

A market maker is a financial institution (usually a bank or specialist firm) that undertakes to quote binding buy and sell prices for certain securities at all times.

Why market makers are indispensable:

Imagine you want to buy 100 Siemens shares. Without a market maker, you'd have to wait until someone wanted to sell exactly 100 Siemens shares – perhaps for hours or days. The market maker steps in: it always has shares "in stock" and quotes a price immediately.

How market makers earn money:

• Spread: the difference between the buy and sell price. Example: buy price €150.02, sell price €149.98. Spread = €0.04 per share
• Across millions of transactions, this adds up to enormous sums

Important market makers in Germany:

• Lang & Schwarz: the largest market maker for off-exchange trading, partner of Trade Republic
• Tradegate: an exchange AND market maker for many brokers
• Baader Bank: market maker for gettex (Scalable Capital)
• Citadel Securities, Jane Street: the largest market makers worldwide

For you as an investor: market makers provide liquidity – you can buy and sell at any time. ETFs benefit in particular: the market maker ensures that the ETF price stays close to its fair value (NAV).