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Explain the Difference between a Designated Market Maker and an Independent Liquidity Provider

DMMs have a formal, required obligation to provide liquidity; independent LPs provide it opportunistically to profit from the spread.
Greeks.Live10.11.25

Explain the Difference between a Designated Market Maker and an Independent Liquidity Provider.

A designated market maker (DMM) has a formal, contractual obligation with an exchange to maintain a continuous, two-sided market (bid and ask) for a specific set of securities, often receiving exclusive privileges. An independent liquidity provider (LP) operates without such a formal contract, providing liquidity opportunistically based on their own trading strategies.

DMMs provide a baseline of required liquidity, while independent LPs supplement this to tighten spreads and further reduce slippage.

How Do Concentrated Liquidity Pools Aim to Improve the Spread on DEXs?
What Is the Effective Spread and How Does It Differ from the Quoted Spread in a Thin Market?
How Do Liquidity Providers (LPs) in a DEX Earn Fees?
What Is Impermanent Loss, and Is It Relevant to Decentralized Options Trading?

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