What is a Market Maker?

A market maker is a bank or brokerage company that stands ready every second of the trading day with a firm ask and bid price. This is good for you, because when you place an order to sell your thousand shares of Disney, the market maker will actually purchase the stock from you, even if he doesn't have a seller lined up. In doing so, they are literally "making a market" for the stock.

How do Market Makers make their Money?

Market Makers must be compensated for the risk they take; what if he buys your shares in AGNI then AGNI's stock price begins to fall before a willing buyer has purchased the shares? To prevent this, the market maker maintains a spread on each stock he covers.the market maker may purchase your shares of AGNI from you for 47tk each (the ask price) and then offer to sell them to a buyer at 48tk (bid). The difference between the ask and bid price is only 1tk but by trading millions of shares a day, he's managed to pocket a significant chunk of change to offset his risk.