Market maker

In financial markets generally, a market maker is a firm that stands ready to buy and sell at quoted prices, earning the spread and providing liquidity. Large banks make markets in currencies to each other and to clients.

In retail forex and CFDs, calling a broker a market maker means it is your counterparty: when you buy, it sells to you, and it manages the resulting exposure itself. This is also called running a dealing desk or a B-book. Many brokers use a mix, passing some flow to external liquidity providers (STP or A-book) and keeping the rest.

How a market maker earns

• The spread it quotes, often fixed or wider than raw interbank spreads, with no separate commission.
• Swaps and other fees.
• Net client losses on positions it keeps, which is where the conflict of interest comes from.

Is that a problem?

Not automatically. A regulated market maker must follow best-execution rules, keep client money in segregated accounts, and price fairly from market feeds. Because most retail CFD accounts lose money, the model can be profitable without any wrongdoing. The risk is that a poorly supervised firm has a motive to widen spreads, delay fills or requote against clients. That is why regulation and the broker's licence matter more than the label.

Common misconception

"No dealing desk" marketing is sometimes taken as proof of better prices. In practice, costs and execution quality vary widely within each model, and you can compare them directly. See ECN, STP and market maker execution and how forex brokers make money.