How Do Centralized Exchanges Generate Revenue from Their Market Making Activities?

Centralized exchanges can generate revenue from their market making activities in several ways. The most direct method is through the bid-ask spread.

When the exchange acts as a market maker, it profits from the difference between the price at which it buys an asset (the bid) and the price at which it sells it (the ask). Additionally, some exchanges have their own proprietary trading desks that engage in market making and other trading strategies to generate profits.

They can also charge fees to other market making firms for the privilege of providing liquidity on their platform.