Market makers play a big role in stock exchanges by providing continuous buying and selling prices for shares. They make sure there is always someone to buy from or sell to, which helps keep the market active and smooth. Without market makers, it would be harder for investors to trade stocks quickly and at fair prices.

What Does a Market Maker Do on a Stock Exchange?

A market maker is a person or company registered with a stock exchange who is always ready to buy or sell shares of a particular stock. Their main job is to offer a buying price (bid) and a selling price (ask) all the time. This ensures that traders and investors don’t face delays while buying or selling stocks. Market makers help the exchange work smoothly without interruptions in trading.

Why Are Market Makers Important in Stock Exchanges?

Market makers are important because they help keep the market liquid. Liquidity means there are always buyers and sellers available, so trades happen quickly. They also reduce the price gap between buying and selling, which is called the spread. With smaller spreads and faster trade execution, it becomes easier and cheaper for people to invest in the stock market. Their role supports fair pricing and smooth transactions.

How Do Market Makers Support Retail Investors?

For retail investors, market makers ensure that stocks can be bought or sold at any time during market hours. This means you don’t have to wait for another investor to place an order. Even in less traded stocks, market makers make trading possible. This helps small investors trade with confidence, knowing they will always find a buyer or seller when they need to enter or exit a position.

How Do Market Makers Make Profits?

Market makers earn profit by taking advantage of the difference between the buying price and the selling price, which is called the bid-ask spread. For example, if they buy a stock at ₹100 and sell it at ₹100.50, they make ₹0.50 per share. They do this across thousands of shares and trades daily, which brings in profit from volume rather than big price movements.

Do All Stocks Have Market Makers?

Most actively traded stocks listed on major stock exchanges like NSE and BSE have market makers. These stocks are called liquid stocks. However, not all stocks, especially small-cap or low-volume ones, have active market makers. In such cases, it may take longer to complete a trade or prices may move quickly due to low supply and demand. That’s why traders often prefer stocks with market maker support.

Can Market Makers Affect the Market?

Market makers don't control the market, but their continuous buying and selling helps keep prices stable. They adjust their prices based on supply and demand. If there are more buyers than sellers, the market maker may increase the price slightly. If more people are selling, they may lower it. This automatic balancing helps maintain fair and efficient pricing across the exchange.