What Is the Role of the ‘Market Maker’ in a Traditional Order Book Exchange?

The market maker's primary role is to provide liquidity by continuously placing both limit buy (bid) and limit sell (ask) orders on the order book. They profit from the bid-ask spread, buying low and selling high.

By maintaining a constant presence, they reduce volatility, tighten the spread, and ensure that other traders can execute their orders quickly. They are essential for the smooth functioning of centralized exchanges.