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Market Maker
A market maker is a participant that continuously quotes both buy and sell prices for a given instrument, providing liquidity to the market. In oil trading, market makers play a critical role in futures, options, and swaps markets.
By maintaining two-sided quotes, market makers facilitate price discovery and enable other participants to transact efficiently. They profit primarily from bid–ask spreads and, in some cases, volume incentives from exchanges.
Market making involves managing inventory risk, as rapid price movements can leave the maker exposed. In oil markets, volatility driven by macroeconomic data or geopolitical events can challenge market-making strategies.
Strong market-making activity is a key indicator of healthy and resilient oil markets.