:: definitions

Traders101.com reproduces this definition here under license for your convenience.

Market makers are the bigger players that 'make a market' trading in particular stocks & other securities. Market makers, like big banks and financial institutions, make a lot of money trading for their clients, but also on their own accounts. Market makers usually have a contractual obligation to take valid orders for the stocks they make a market in - this is essential in order to preserve market liquidity. Market makers can process extremely large orders, although they will usually introduce these orders piecemeal into a market in order not to alert other players to their intentions'. The giant well known firms of Goldman Sachs and Morgan Stanley are good examples of market makers. It is usually wise to avoid trading AGAINST the direction of a market maker in their own specialist stocks, although rumours of underhand activities by 'insider clubs' of market makers are fortunately just fiction.