In financial markets, particularly within order book systems, a “Maker” is an entity that places a limit order on an exchange’s order book, thereby “making” liquidity available for other traders. These orders are not immediately executed but wait for a counterparty to “take” them. In crypto trading, market makers are critical for depth and efficiency, especially in RFQ systems and decentralized exchanges.
Mechanism
The mechanism involves a maker submitting a buy limit order below the current market price or a sell limit order above the current market price. These orders reside on the order book, contributing to its depth and providing a reference point for price discovery. When another trader, a “taker,” executes against this limit order, the maker’s order is filled. Makers typically earn trading fee rebates or liquidity provider incentives for their role.
Methodology
The strategic approach of a maker centers on providing liquidity and capturing the bid-ask spread, often employing high-frequency trading algorithms to continuously adjust quotes. In crypto, this includes operating sophisticated automated market-making bots on centralized exchanges or contributing liquidity to AMM pools on DEXs. For institutional RFQ platforms, designated market makers respond to requests for quotes, providing two-sided prices and fulfilling larger block trades, ensuring market depth and efficient execution for institutional clients.
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