Market Maker

A market maker is a model under which certain entities act as a direct counterparty to traders' transactions, providing continuous bid and ask prices and ensuring the liquidity needed to execute orders at any time.

How it works: Instead of routing the order to an external market, the market maker absorbs the trade internally and quotes a bid and an ask price, with the spread representing a portion of its revenue.

Significance for the trader:

• Provides continuous liquidity even in low-volume instruments or during off-peak hours.
• Often offers fast execution and price certainty (instant execution).
• Well-suited for financial instruments that lack a deep, centralized market.

Common mistakes:

• Believing that all market makers operate without transparency, whereas licensed entities are subject to strict regulatory oversight.
• Confusing this model with direct execution models (ECN/STP).
• Overlooking the impact of fixed or variable spreads on overall trading costs.

Understanding the market maker model is essential for evaluating how financial instruments are priced and how orders are executed on the platform being used. How it works within the context of the EVEST platform: This concept refers to a pricing mechanism where a specific entity acts as a counterparty to trades while providing continuous bid and ask quotes. EVEST is committed to fully and transparently clarifying the adopted pricing mechanism for its clients, regardless of the selected account type.

When it is advisable to understand this concept: It is important for every trader to understand the difference between various pricing mechanisms before choosing an account type on EVEST, especially when trading low-liquidity instruments that rely more heavily on stable internal pricing.

Risks: A potential conflict of interest may arise if the pricing mechanism is not entirely transparent, and quoted prices may slightly diverge from external benchmark market prices under certain conditions.

Additional common mistakes: Some confuse this concept with direct execution without grasping the fundamental differences between them regarding the pricing mechanism and the actual source of liquidity behind each trade.

Relationship to risk management: Understanding the applied pricing mechanism helps traders make an informed decision regarding the appropriate account type for their trading style. EVEST is dedicated to publishing clear execution policies, enabling traders to evaluate how well this mechanism aligns with their strategy and risk tolerance before starting live trading on the platform.