How Do Market Makers Make Money? Real Spread Data

Market makers make money mainly by earning the bid-ask spread: they quote a price to buy (the bid) and a slightly higher price to sell (the ask), and when other traders hit both sides, the gap stays with the firm. On liquid stocks that gap is pennies — collected across enormous volume at machine speed. Every number below is measured from real US quote and trade data, with the exact SQL one click away.

What Is a Market Maker? A Plain-English Definition

A market maker is a trading firm that stands ready to buy and sell a stock at publicly posted prices, all day, on both sides at once. Think of a used-car dealer: buy your car at one price, sell a similar one at a slightly higher price — the markup is the price of instant service. A market maker does the same with shares, at pennies of markup and computer speed.

Market makers register with exchanges and FINRA and take on formal quoting obligations. On the New York Stock Exchange, each listed stock also has a designated market maker (DMM), one firm with an explicit duty to keep quotes tight and orderly in that name. A broker, by contrast, never takes the other side of your order — it routes the order elsewhere for execution. Brokers route; market makers fill.

What Market Makers Actually Do All Day: Quote Updates, Measured

"Standing ready to trade" means constantly re-pricing. Every time a market maker adjusts its bid or ask on any venue, the consolidated tape records a quote update, and the national best bid and offer (NBBO) is the tightest combination across all venues. Most explainers hand-wave that quotes update "thousands of times per second." Here is the measured pace for one household name on the latest session:

WITH (
  SELECT max(toDate(sip_timestamp))
  FROM global_markets.cache_stocks_quotes
  WHERE ticker = 'AAPL' AND sip_timestamp >= now() - INTERVAL 7 DAY
) AS last_session
SELECT
  toString(last_session) AS session,
  round(sum(updates) / 1e6, 2) AS updates_millions,
  round(sum(updates) / dateDiff('minute', min(second), max(second))) AS avg_per_minute,
  max(updates)                 AS busiest_second
FROM (
  SELECT toStartOfSecond(sip_timestamp) AS second, count() AS updates
  FROM global_markets.cache_stocks_quotes
  WHERE ticker = 'AAPL'
    AND sip_timestamp >= now() - INTERVAL 7 DAY
    AND toDate(sip_timestamp) = last_session
  GROUP BY second
)

As of 2026-07-01, AAPL's national best bid and offer updated 1.6 million times in one session — an average of 1665 updates per minute across the extended day (4:00am–8:00pm ET), with 2099 updates in the single busiest second. Nobody types those prices — that pace is competing algorithms re-quoting as conditions shift.

How Market Makers Make Money: The Bid-Ask Spread

The core trade is simple. Quote a hypothetical $10.00 bid / $10.05 ask. Buy 100 shares from a seller at $10.00, sell 100 shares to a buyer at $10.05, and the book is flat again — the firm keeps $5. Repeat at scale and pennies become a business. The spread is the fee that never appears on a trade confirmation: buyers pay the ask, sellers receive the bid — our bid-ask spread explainer has the full treatment.

How big is that fee in practice? Here it is measured across every NBBO update over the past week, for two household mega-caps and one genuinely thin small-cap (Nathan's Famous):

SELECT
  ticker,
  round(avg(ask_price - bid_price) * 100, 1)                                     AS avg_spread_cents,
  round(avg(ask_price - bid_price) / avg((ask_price + bid_price) / 2) * 100, 3)  AS spread_pct_of_price,
  round(avg(ask_price - bid_price) * 100, 2)                                     AS round_trip_100_shares_dollars
FROM global_markets.cache_stocks_quotes
WHERE ticker IN ('AAPL', 'KO', 'NATH')
  AND sip_timestamp >= now() - INTERVAL 7 DAY
  AND bid_price > 0 AND ask_price > bid_price
GROUP BY ticker
ORDER BY ticker

AAPL's average quoted spread was 3.9 cents, and KO's was 1.5 cents. Cents per share equals dollars per 100 shares, so a 100-share round trip in AAPL carries about $3.93 of spread cost. NATH averaged 112.5 cents — 1.111% of the share price — putting a 100-share round trip near $112.53 in spread alone. Same service, wildly different price: in a thin name, fewer market makers compete and each fill leaves the firm holding inventory longer.

The spread is not the whole business — market makers also collect exchange rebates for posting quotes and, in the wholesale segment, get paid for order flow (covered below) — but spread capture is the engine.

When Spreads Widen: The Open, the Close, and After Hours

The spread is a live price for immediacy, moving with risk and competition through the day. Here is AAPL's average quoted spread in half-hour buckets across one extended session:

WITH (
  SELECT max(toDate(sip_timestamp))
  FROM global_markets.cache_stocks_quotes
  WHERE ticker = 'AAPL' AND sip_timestamp >= now() - INTERVAL 7 DAY
) AS last_session
SELECT
  formatDateTime(toStartOfInterval(toTimeZone(sip_timestamp, 'America/New_York'), INTERVAL 30 MINUTE), '%H:%i') AS et_time,
  round(avg(ask_price - bid_price) * 100, 1) AS avg_spread_cents
FROM global_markets.cache_stocks_quotes
WHERE ticker = 'AAPL'
  AND sip_timestamp >= now() - INTERVAL 7 DAY
  AND toDate(sip_timestamp) = last_session
  AND bid_price > 0 AND ask_price > bid_price
GROUP BY et_time
ORDER BY et_time

In the 4:00am ET pre-market bucket, the average spread was 32.2 cents. The first regular-hours half-hour (9:30–10:00am ET) averaged 7.2 cents, and by early afternoon it settled near 3.6 cents. After the 4:00pm close it widened right back out — the final extended-hours bucket averaged 16.7 cents. On this session, spreads were widest outside regular hours and just following the open, and tightest through the busy afternoon — more firms quoting at once coincides with tighter spreads.

Where Market Makers Quote: The US Venue Map

"The stock market" is really a network of venues, and market makers quote on many at once. Our exchange reference table lists every US stock venue:

SELECT
  if(type = 'TRF', 'off-exchange reporting facility (TRF)', 'public exchange') AS venue_type,
  count() AS venues,
  arrayStringConcat(arraySort(groupArray(name)), ' | ') AS venue_names
FROM global_markets.stocks_exchanges
WHERE asset_class = 'stocks' AND locale = 'us' AND type IN ('exchange', 'TRF')
GROUP BY venue_type
ORDER BY venues DESC

There are 18 public stock exchanges in the US — not just NYSE and Nasdaq, but Cboe's equity exchanges, IEX, MEMX, MIAX Pearl and more — plus 6 off-exchange trade-reporting facilities (TRFs), including FINRA's, where trades executed off-exchange — by wholesalers and in dark pools — get reported.

Where does actual trading print? Here is one session of AAPL trades grouped by venue:

WITH (
  SELECT max(toDate(sip_timestamp))
  FROM global_markets.stocks_trades
  WHERE ticker = 'AAPL' AND sip_timestamp >= now() - INTERVAL 7 DAY
) AS last_session
SELECT
  if(x.name = '', concat('Unmapped venue ', toString(t.exchange)), x.name) AS venue,
  multiIf(x.type = 'TRF', 'TRF', x.type = '', 'unmapped', x.type)          AS venue_type,
  round(count() / 1000, 1)                                                 AS trades_thousands,
  round(100 * count() / sum(count()) OVER (), 1)                           AS pct_of_trades
FROM global_markets.stocks_trades AS t
LEFT JOIN (
  SELECT id, name, type FROM global_markets.stocks_exchanges
  WHERE asset_class = 'stocks' AND locale = 'us'
) AS x ON t.exchange = x.id
WHERE t.ticker = 'AAPL'
  AND t.sip_timestamp >= now() - INTERVAL 7 DAY
  AND toDate(t.sip_timestamp) = last_session
GROUP BY venue, venue_type
ORDER BY venue_type = 'TRF' DESC, trades_thousands DESC

AAPL printed trades on 18 distinct venues in a single session. The table's top row — 48.1% of all prints — happened on no exchange at all: those are off-exchange trades reported through FINRA's facility, which is where wholesale market makers fill retail orders.

Payment for Order Flow: Where Your Broker Fits In

When you tap "buy" at a commission-free broker, your order usually never reaches an exchange. The broker routes it to a wholesaler — a market maker that specializes in filling retail orders — and the wholesaler may pay the broker for that flow. That payment is payment for order flow (PFOF).

Why pay to fill retail orders? Small orders from many independent customers are, on average, easier to fill than large institutional orders, and regulation requires the fill price to match or beat the NBBO — fills inside the spread count as price improvement. The big off-exchange slice in the venue table above is this business showing up on the tape. Regulators continue to debate whether PFOF serves investors well.

Do Market Makers Manipulate Prices or Trade Against You?

A market maker does take the other side of your trade — that is the product, just as a currency kiosk takes the other side of your euros. Taking the other side is not the same as betting against you: the firm's goal is to capture the spread and end the day close to flat, hedging inventory as it builds. Some of each day's short-sale volume is market makers selling shares they have not yet bought — routine liquidity provision, exempt from certain short-sale restrictions; short interest vs short volume covers how to read those numbers.

As for setting or manipulating prices: no single firm controls the quote. The NBBO is the best bid and offer across 18 competing exchanges, and on the measured session AAPL's quote updated 1665 times per minute — a posted price survives only until a competitor improves it. Market making is a registered, audited activity under SEC and FINRA rules, with real enforcement cases when firms cross the line. Skepticism is healthy; the observable record here shows tight, constantly refreshed, competitive quotes.

Can Market Makers Lose Money?

Yes. The spread is compensation for two real risks. Inventory risk: in a fast one-way market, the firm keeps buying as prices fall (or selling as they rise), and the "flat by the close" book turns into a directional position. Adverse selection: when the trader on the other side knows more, the firm ends up buying just before markdowns and selling just before markups. Firms manage both by widening spreads, shrinking quoted size, and hedging — the intraday chart above shows that response in miniature at the open and after the close.

Market Maker FAQ

What is a market maker in simple terms?

A firm that continuously offers to buy a stock at one price (the bid) and sell at a slightly higher price (the ask), earning the gap. It sells immediacy: you trade right now instead of waiting for another investor to show up.

Is Robinhood a market maker?

No. Robinhood is a broker: it routes customer orders to wholesalers — market makers such as Citadel Securities and Virtu — for execution, and it may receive payment for order flow for that routing.

Who are the biggest market makers in the US?

Citadel Securities, Virtu Financial, Jane Street, Susquehanna International Group, IMC, and Optiver are among the best-known electronic market makers; NYSE floor DMMs include Citadel Securities and GTS.

Do market makers set stock prices?

They set quotes, not prices. A quote is an offer that competitors across 18 exchanges can undercut; the traded price emerges from whoever accepts whose quote.

How much does the bid-ask spread cost on a real trade?

Measured over the past week: about $3.93 round trip on 100 shares of AAPL, versus roughly $112.53 on 100 shares of thinly traded NATH. Limit orders cap what you pay; market orders accept the quote as-is.

Every figure above is a stored query you can open, inspect, and re-run — point the Strasmore terminal at the same tables and ask the same question about any ticker you own.