How to Become a Registered Market Maker

To become a market maker, a firm registers as a broker-dealer, joins an exchange, and then registers as a market maker in named securities, which switches on a standing obligation to quote both sides of those names through a set share of every session. It is a registration with a rulebook attached: minimum quote size, maximum quote width, how much of the day the quote has to be live, and how much liquid capital sits behind it. The status can also be taken away, and the rules for that are written down too.

What is a registered market maker?

A registered market maker is a broker-dealer that has accepted an affirmative obligation at a specific exchange to post continuous, firm, two-sided quotes in the securities assigned to it. Firm means executable. Under SEC Rule 602 the quotations an exchange publishes for its market makers must be honored up to their displayed size, and those published quotations are the raw material for the national best bid and offer, the consolidated best price against which every broker's executions are measured. Quotes that could be ignored would leave that benchmark with nothing solid underneath it.

The privileges attached to the status include the bona fide market making exception to Regulation SHO's locate requirement, plus margin treatment that recognizes a hedged book. The obligation runs in the other direction: the quote goes up whether or not the firm wants the position that day.

How do you become a market maker?

Each step below is a separate application, and the sequence is the same at every venue.

1. Register the firm with the SEC as a broker-dealer on Form BD and gain FINRA membership. Traders qualify through the Series 57 securities trader exam, supervisors through the Series 24.
2. Arrange clearing and settlement, either as a self-clearing member of NSCC and DTC or through a clearing firm willing to carry the positions.
3. Apply for membership at each exchange where the firm intends to quote, then file that exchange's market maker registration form and take assignments in specific securities.
4. Connect to the venue's quoting ports and pass its certification testing before the first quote goes out.

Step three is the one that surprises people. Registration is per exchange, and one liquid stock is quoted on more than a dozen order books at the same moment. The panel below counts bid updates by venue in a single household name over one half hour.

SELECT
    ex.venue_name                  AS venue,
    ex.venue_code                  AS venue_code,
    q.bids                         AS quote_update_count,
    formatReadableQuantity(q.bids) AS updates_label
FROM
(
    SELECT
        toUInt32(bid_exchange) AS exchange_id,
        count()                AS bids
    FROM global_markets.cache_stocks_quotes
    WHERE ticker = 'AAPL'
      AND sip_timestamp >= toDateTime('2026-07-16 16:00:00')
      AND sip_timestamp <  toDateTime('2026-07-16 16:30:00')
      AND bid_price > 0
    GROUP BY exchange_id
) AS q
INNER JOIN
(
    SELECT
        toUInt32(id)   AS exchange_id,
        any(name)      AS venue_name,
        any(acronym)   AS venue_code
    FROM global_markets.stocks_exchanges
    WHERE asset_class = 'stocks'
    GROUP BY exchange_id
) AS ex ON ex.exchange_id = q.exchange_id
ORDER BY q.bids DESC

16 separate venues published a bid in AAPL across that half hour. Nasdaq carried the heaviest traffic at 46.67 thousand bid updates. Every one of those books is its own membership, its own market maker registration, and its own set of obligations.

What are the quoting obligations?

The core requirement is easy to state and expensive to keep: a live bid and a live offer in every assigned security, each good for at least one round lot of 100 shares, within a defined distance of the NBBO, through a defined share of the session.

Nasdaq writes that distance as a designated percentage away from the national best bid and offer, 8 percent for the most active Tier 1 stocks through the core of the day, wider for less active names, and wider again during the opening and closing periods. A quote parked outside the band is not a quote for compliance purposes.

The NYSE equivalent is the designated market maker, or DMM, one firm per listed stock, carrying the opening and closing auctions on top of continuous quoting. NYSE Rule 104 requires a DMM to be at the inside quote at least 10 percent of the trading day in assigned securities that average a million shares a day or more, and at least 15 percent in the thinner ones. Supplemental liquidity providers take a similar percentage commitment without the auction duties.

Width rules are written in percentages, and the quoted spread they have to bound moves through the day. This panel tracks it across one ordinary Thursday session in two household names, measured in basis points of the midpoint. One basis point is a hundredth of one percent.

SELECT
    formatDateTime(toStartOfFifteenMinutes(toTimeZone(sip_timestamp, 'America/New_York')), '%H:%i') AS et_time,
    round(avgIf(10000 * (toFloat64(ask_price) - toFloat64(bid_price))
                / ((toFloat64(ask_price) + toFloat64(bid_price)) / 2), ticker = 'AAPL'), 2) AS aapl_spread_bps,
    round(avgIf(10000 * (toFloat64(ask_price) - toFloat64(bid_price))
                / ((toFloat64(ask_price) + toFloat64(bid_price)) / 2), ticker = 'KO'), 2)   AS ko_spread_bps
FROM global_markets.cache_stocks_quotes
WHERE ticker IN ('AAPL', 'KO')
  AND sip_timestamp >= toDateTime('2026-07-16 13:30:00')
  AND sip_timestamp <  toDateTime('2026-07-16 20:00:00')
  AND bid_price > 0
  AND ask_price > bid_price
GROUP BY et_time
HAVING countIf(ticker = 'AAPL') > 0
   AND countIf(ticker = 'KO') > 0
ORDER BY et_time

In the 09:30 bucket the average quoted spread measured 2.7 bps in AAPL and 2.98 bps in KO. By the 15:45 bucket they measured 0.95 bps and 1.31 bps. Trace the line across the middle of the day and the shape of the session appears on its own. Why spreads widen at the open takes that pattern apart, and what a bid ask spread is covers the measure itself.

What a percentage width rule has to cope with

Same half hour, six household names, sorted by quoted spread.

SELECT
    ticker,
    round(avg(10000 * (toFloat64(ask_price) - toFloat64(bid_price))
              / ((toFloat64(ask_price) + toFloat64(bid_price)) / 2)), 2) AS avg_spread_bps,
    count()                                                              AS quote_update_count
FROM global_markets.cache_stocks_quotes
WHERE ticker IN ('AAPL', 'MSFT', 'NVDA', 'KO', 'F', 'PFE')
  AND sip_timestamp >= toDateTime('2026-07-16 16:00:00')
  AND sip_timestamp <  toDateTime('2026-07-16 16:30:00')
  AND bid_price > 0
  AND ask_price > bid_price
GROUP BY ticker
ORDER BY avg_spread_bps

The tightest of the six, AAPL, averaged 1.23 basis points. The widest, F, averaged 7.09. The gap is largely a price level effect. Take a one cent spread as a worked example: on a $200 stock that is half a basis point, and on a $20 stock the same cent is five. A percentage band bites hardest on high priced names, where a single minimum increment can use up most of the allowance. A subset of tight names has quoted in half cent increments since the amended tick size rule took effect in November 2025, which half penny tick sizes walks through.

How do options market makers register?

Options market makers register venue by venue as well, across more than a dozen US options exchanges. The appointment is by class rather than by contract: take an appointment in a name and the obligation covers a stated percentage of the series listed in that class, commonly around 60 percent, with a higher bar for a lead or primary market maker, inside maximum bid ask differentials that widen as the option price rises.

The word series carries the weight there. Every strike at every expiration is a separate instrument with its own quote.

SELECT
    expiration_date                              AS expiration_date,
    formatDateTime(expiration_date, '%b %d, %Y') AS expiry_label,
    countDistinct(ticker)                        AS contract_count,
    countDistinctIf(ticker, volume > 0)          AS traded_contract_count
FROM global_markets.options_greeks
WHERE underlying_symbol = 'AAPL'
  AND date = toDate('2026-07-16')
  AND expiration_date >= toDate('2026-07-16')
GROUP BY expiration_date
ORDER BY expiration_date

On that one date, listed AAPL options spanned 24 expirations, running from Jul 17, 2026 out to Dec 15, 2028. The nearest expiration alone carried 132 distinct contracts, of which 132 printed a trade during the session. A continuous quoting obligation over a book that size is an engineering problem before it is a trading one, and why options orders do not get filled shows what that looks like from the order entry side.

How much capital does a market maker need?

SEC Rule 15c3-1, the net capital rule, sets the liquid capital a broker-dealer has to hold at all times. A dealer making markets computes it per security: $2,500 of net capital for each security in which it makes a market, or $1,000 for each one whose market value is $5 or less, based on the average number of markets made over the preceding 30 days, with a floor of $100,000 and a ceiling of $1,000,000. A firm that also carries customer accounts starts from a $250,000 minimum instead.

Two details matter more than the headline figures. Net capital counts liquid assets after haircuts on the firm's own positions: inventory that is hard to sell counts for less than cash, and a hedged book haircuts differently from an outright one. The computation is also continuous rather than quarterly. A firm that falls below 120 percent of its required minimum owes its regulators an early warning notice, and a firm below the minimum itself has to stop conducting a securities business until it is back above the line. Exchanges and clearing firms layer their own higher thresholds on top of the SEC floor.

What happens when a market maker withdraws or is suspended?

Leaving is governed too. A Nasdaq market maker that voluntarily terminates its registration in a security, which it does by withdrawing its two-sided quote, may not re-register in that security for 20 business days. Excused withdrawals cover defined situations such as systems failures and certain legal or regulatory events, and the exchange grants them rather than the firm claiming them.

Failure is handled separately from withdrawal. An exchange can suspend or terminate a registration for repeated failures to meet the quoting obligation, and it can cut a firm's quoting access at the port while a review runs. FINRA rules govern the equivalent in quoted over the counter securities, where withdrawing a quotation carries its own notice requirements.

Market maker, wholesaler, or proprietary trading firm?

Three kinds of firm get called market makers in conversation. Only one of them carries an exchange quoting obligation.

A registered market maker holds a market maker registration at an exchange in named securities, quotes both sides continuously inside the rulebook above, and can be suspended for not doing it.

A wholesaler, also called an internalizer, is the firm on the other side of most retail orders. A retail broker routes its customer orders to a wholesaler, which executes them away from the exchanges at or better than the NBBO. Wholesalers are broker-dealers held to best execution and order handling rules, and the largest of them also hold exchange market maker registrations. That retail execution business by itself carries no continuous quoting obligation in any particular name. A wholesaler can decline an order and route it away. A registered market maker cannot pull its quote in an assigned security and keep the registration.

A proprietary trading firm trading only its own capital, with no exchange market maker registration, has no quoting obligation at all. It can take liquidity, post passive orders, or stand aside for a whole session. Plenty of these firms behave like market makers most days. The registration is still the line that matters, since the registration is the thing an exchange can suspend.

For the names behind the roles, see the biggest market makers in US equities. The economics sit in how market makers make money and why market makers lose money, and the venue fee schedules underneath all of it are in maker taker fees and rebates.

FAQ

Do you need a license to become a market maker?

Market making is done by registered broker-dealer firms, not by individuals. The firm registers with the SEC, joins FINRA, and applies at each exchange, while the people trading for it hold qualifications such as the Series 57 securities trader exam, with supervisors holding the Series 24.

What is the minimum net capital for a market maker?

Under SEC Rule 15c3-1 a market making dealer computes $2,500 of net capital per security quoted, or $1,000 per security valued at $5 or less, with a $100,000 floor and a $1,000,000 ceiling. A firm carrying customer accounts faces a $250,000 minimum. Exchanges and clearing firms set higher thresholds of their own.

What percentage of the trading day must a market maker quote?

It varies by venue and role. NYSE designated market makers must be at the inside quote at least 10 percent of the trading day in more active assigned securities and at least 15 percent in thinner ones. Nasdaq market makers must hold continuous two-sided quotes within a designated percentage of the NBBO through regular hours.

Can a market maker simply stop quoting?

Yes, with consequences. Withdrawing a two-sided quote in a Nasdaq security terminates the registration in that name and blocks re-registration for 20 business days. Excused withdrawals granted by the exchange cover defined situations such as systems failures.

Is a wholesaler the same as a registered market maker?

Not in the regulatory sense. A wholesaler executes retail order flow away from the exchanges at or better than the NBBO, and many wholesalers also hold exchange market maker registrations. The internalization business itself carries no continuous quoting obligation in any given security.

Every panel here carries the SQL that produced it. Expand one to see how a quoted spread is measured across a session, or ask the same question in plain English on the Strasmore terminal.