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Who are market makers and market users?
Who are market makers and market users?

Financial market participants can be divided into two nominal categories: market makers and market users. These groups differ in the degree of influence on prices and the level of activity. For a better understanding of Forex, it is advisable to understand these concepts.

Getting to know influential players

A market maker is a Forex participant who can manipulate the actual price of a specific currency by performing an overwhelming share of operations in the global financial market. Large commercial companies and banks, including public ones, enjoy market maker status.

Market makers are very active in Forex. They have assets worth hundreds of millions of dollars at their disposal. That is why their actions determine the price of a specific currency and all their strategies are aimed at manipulating quotes in their interests.

The main responsibilities of the largest market participants are as follows:

  • prevention of sharp jumps in the price of a specific asset;
  • spread minimization;
  • ensuring timely informing of the market about quotations;
  • execution of orders at the best quotes.

All market makers take the risk of buying and keeping assets in their accounts for resale, which is why they have certain privileges. Market makers are often called independent market participants, who enjoy a special status.

Successful traders always focus their attention on market makers' actions. This allows them to better understand the market, foresee important events, increase their income and protect themselves from scammers, who, unfortunately, are not uncommon in Forex.

Market users

Market users are small financial organizations that request market prices of a specific currency. In other words, they are small firms and banks that use quotes produced by market makers. Users are less active participants in the financial market. Naturally, they make a large number of trades, but the share of each participant is minimal.

The advantage of market users is that they can choose whether to accept a market maker's quotations or not, because the value of assets may differ for different market participants. Of course, the difference usually does not exceed a few points, but in the case of large financial assets, even an insignificant difference can lead to serious losses or profits. That is why if market users see that a market maker allows sharp price jumps, they have every right to stop working with the market maker.


What is the relation between market makers, market users, and traders?

The financial market hierarchy is simple and straightforward. Market maker companies set quotes, market users use them, and traders work with them. In other words, users act as a link between a trader and market makers. The quotes that a trader sees in the terminal have been approved by market users and directly depend on the behavioral strategy of a particular market maker that provides them.

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