Market Makers
Market maker brokers create liquidity by buying and selling securities. This guide will explain the definition of market makers and how they work, along with a review of the pros and cons of this type of broker, including price manipulation. Use our list of the best market maker brokers to start trading:
Market Maker Brokers UK
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AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for trading, alongside a comprehensive education center and multilingual customer support.
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Established in 1989, CMC Markets is a respected broker listed on the London Stock Exchange and authorized by several tier-one regulators, including the FCA, ASIC and CIRO. More than 1 million traders from around the world have signed up with the multi-award winning brokerage.
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XM is a globally recognized forex and CFD broker with 10+ million clients in 190+ countries. Since 2009, this trusted broker has been known for its low fees on 1000+ instruments. XM is regulated by multiple financial bodies, including the ASIC and CySEC.
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eToro is a top-rated multi-asset platform which offers trading services in thousands of CFDs, stocks and cryptoassets. Launched in 2007, the brand has millions of active traders globally and is authorized by tier one regulators, including the FCA and CySEC. The brand is particularly popular for its comprehensive social trading platform. Cryptoasset investing is highly volatile and unregulated in the UK and some EU countries. No consumer protection. Tax on profits may apply. 76% of retail CFD accounts lose money.
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OANDA is an award-winning global broker, established in 1996. The hugely respected brand offers competitive trading accounts and serves clients from 196 countries. It remains a popular option with both beginners and experienced traders thanks to its user-friendly and sophisticated web platform, no minimum deposit and premium currency products and services. The company is also overseen by reputable regulators, including the FCA, ASIC and CIRO.
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Trade Nation is a top FX and CFD broker regulated in multiple jurisdictions including the UK and Australia. The firm offers low-cost fixed and variable spreads on 1000+ assets with robust trading platforms and training materials. The Signal Centre can also be used for trade ideas.
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Founded in 1974, IG is part of IG Group Holdings Plc, a publicly traded (LSE: IGG) brokerage. The brand offers spread betting, CFD and forex trading across an almost unrivalled selection of 17,000+ markets, with a range of user-friendly platforms and investing apps. For 50 years, IG has maintained its position as an industry leader, excelling in all key areas for traders.
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Founded in 2006, FxPro is an established forex, CFD and spread betting broker offering 2100+ assets to over 2 million clients worldwide. The broker is regulated in 4 jurisdictions and offers reliable 24/5 customer support, earning it a high trust and safety score. FxPro has also picked up more than 100 industry accolades for its competitive trading conditions, including fast execution and deep liquidity.
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Established in 2008 and headquartered in Israel, Plus500 is a prominent brokerage that boasts over 25 million registered traders in over 50 countries. Specializing in CFD trading, the company offers an intuitive, proprietary platform and mobile app. It maintains competitive spreads and does not charge commissions or deposit or withdrawal fees. Plus500 also continues to shine as one of the most trusted brokers with licenses from reputable regulators, including the FCA, ASIC and CySEC.
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Markets.com is a respected broker, offering multi-asset trading opportunities through CFDs or spread betting (UK only). Established in 2008, the brand has an impressive 4.3 million registered customers and is overseen by trusted regulators, including the FCA, ASIC and CySEC. 79.1% of retail accounts lose money.
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BitMEX is a crypto exchange and derivatives trading platform, launched in 2014. The firm offers a fiat–crypto onramp, spot trading, and crypto derivatives including perpetual contracts, traditional futures and quanto futures. BitMEX offers amongst the largest market liquidity of any cryptocurrency exchange.
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FXDD is an established forex and CFD broker founded in 2002. Regulated in Malta, Mauritius, Peru and Malaysia, the broker provides secure trading platforms, competitive ECN spreads and reliable 24/7 customer support. Competitive pricing and ultra-low latency is also offered via the broker's Direct Market Access execution model and tier 1 aggregated liquidity.
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IronFX is a multi-regulated forex and CFD broker founded in 2010. This award-winning firm offers 500+ markets to over 1.5 million clients across 180 countries. Traders can access various account types with competitive pricing on the MT4 platform, as well as 24/5 customer support in 30 languages.
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FXCM is a respected forex and CFD broker, established since 1999. The British-headquartered broker has won multiple awards and operates in various jurisdictions, including the UK and Australia. With zero commissions, over 400 assets, and a range of analysis tools, FXCM remains a popular choice for traders. The broker is also regulated by top-tier authorities including the FCA and ASIC.
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FXTM is a top-rated forex and CFD broker established in 2011 and operating across 4 continents. The company is secure and regulated by leading authorities, including the FCA and CySEC. Offering 1000+ trading markets and three account types, they cater to all levels of trader.
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Focus Option is an offshore broker that specializes in binary options as well as CFDs. Binary options trading on forex, cryptos and three commodities is done through the broker's simple web-based platform with average payouts between 70% and 95%. The broker also offers a mobile app for trading CFDs, with 300+ tradeable instruments.
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MultiBank FX is an established broker offering forex and CFD products since 2005. With 20,000+ instruments, plenty of local payment methods and 24/7 multilingual customer support, the broker is a popular choice among traders globally. New clients can also access a variety of bonus offers and access the hugely popular MT4 and MT5 trading platforms.
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Firstrade is a US-headquartered discount broker-dealer with authorization from the SEC. The company is also a member of FINRA/SIPC. With welcome bonuses, powerful tools and apps, plus commission-free trading, Firstrade Securities is a popular online brokerage. It is also quick and easy to open a new account.
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ActivTrades is a UK-headquartered CFD and forex broker established in 2001. The brokerage is heavily regulated with licenses from the FCA, SCB, CSSF, BACEN & CVM and CMVM. Over 1000 CFDs are available spanning 7 asset classes. Over 93.60% of orders are executed at the requested price. ActivTraders also offers a selection of leading trading platforms, including MT4, MT5, TradingView and ActivTrader platforms.
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Swissquote is a Switzerland-based bank and broker that offers online trading and investing. The company has a high safety score and is listed on the Swiss stock exchange. The firm offers a huge range of products, from stocks, ETFs, bonds and futures to 400+ forex and CFD assets. Hundreds of thousands of traders have opened an account with the multi-regulated brokerage. Clients can get started in three easy steps while 24/7 customer support is available to assist new users.
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FP Markets is an ASIC- and CySEC-regulated broker that offers forex and CFD trading on a broad range of assets through the MT4, MT5 and IRESS platforms. With trading available through standard and raw spread accounts on thousands of international stocks, forex, indices, commodities, cryptocurrencies, bonds and ETFs, this broker has some of the most comprehensive market coverage available. FP Markets also offers a full range of additional features, including educational resources and access to powerful software such as Autochartist.
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Kucoin is a crypto exchange that offers trading on 1000+ tokens as well as leveraged trading opportunities via futures and perpetual swaps. This exchange has a slick trading platform that supports robots, allowing traders to implement automated strategies. Other attractive features include a demo account, flexible funding methods and DeFi features like staking and mining.
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Libertex is a well-known broker, established in 2012. The regulated brand has served numerous clients and is regulated by the Cyprus Securities and Exchange Commission with license number 164/12. Libertex offers CFD trading on 250+ underlying assets, including through an innovative and user-friendly proprietary web trader platform. Choose between CFDs on forex, cryptocurrencies, commodities, stocks, indices and ETFs, which are available with tight spreads and low commissions.
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Trading 212 is a European and UK-regulated CFD broker that also offers stock investing and ISAs. It’s best known for its commission-free trading model and beginner-friendly app, which has helped it attract 2.5 million users and £3.5 billion in client assets.
What Are Market Makers?
Market makers actively quote two sides of a market in a particular security. They play a key role by lodging bids and asks for securities, providing liquidity and depth to markets while profiting from the spread. The most common types of market makers are large banks, financial institutions, and brokerages, giving traders sales and purchase solutions on financial assets.
The presence of market makers plays a big role in ensuring that trading can go ahead seamlessly, meaning if you wish to buy or sell an asset, they will be there to fill your order. If you are trading with a market maker broker, then the brokerage itself will be the counterparty to your trades.
Major FCA-authorised market maker brokers include CMC Markets and XM. Other large market makers that are regulated in the UK include examples like Barclays Bank, BNP Paribas, Citibank, DRW Investments, Lloyds Bank, Natwest Markets, and Standard Chartered.
Making Money – How Does It Work?
Market makers gain revenue through the bid-ask spread that they quote. While market maker brokers follow the general price of the real market, they are not obligated to quote the exact prices. They have the freedom to quote their own prices, and they will usually quote lower bids and higher asks. Since they trade both sides of the market simultaneously, they profit from the difference in price.
As the spread effectively acts as a charge on each trade, market maker brokers that offer tighter spreads are typically more desirable for traders.
Market Makers Vs Trading Brokers
Market makers are not always brokers, with most being banks or other large financial institutions. However, some brokers are also market makers. For example, IG is an FCA-authorised market maker broker in the UK.
Market makers’ role is to provide liquidity to the market; as such, they hold an inventory of tradable financial assets. When they quote their bid-ask prices, they must also quote the tradable volume. When trades are performed with a market maker, they will either buy assets directly from the trader or sell their assets to the trader, making money through the spread between the quoted prices.
Brokers, on the other hand, are intermediaries who facilitate trades between two parties and have the authorisation and expertise to buy/sell financial assets on the trader’s behalf. They usually make money by charging a commission for their services.
However, market maker brokers can trade directly with investors using their asset inventories and setting their own prices, typically allowing them to make money through spreads rather than commissions – although some brokers apply both.
Trading with a market maker broker does come with risk, however. The broker is not always a market maker in all the assets it offers, so it may push the ones that it is a maker for or manipulate the price of those assets to maximise their profits.
Over-the-counter (OTC) CFD brokers can also be market makers, as they typically provide the contracts while also acting as the counterparty, making the market. Because no underlying assets are traded in these contracts, commissions are usually low or zero for share CFDs, and spreads vary between brokers.
IG is a UK-based market maker brokerage that offers real assets and CFD trading. On stock CFDs, they offer no spreads but charge commissions, while on other CFDs they charge spreads. For example, the EUR/GBP forex pair has a minimum spread of 0.9 pips, and an average spread of 2.51 pips.
Pros Of Market Makers
- Both prices and volume are quoted
- Typically low or no commission fees
- The broker acts as counterparty, allowing for quicker trades
- High liquidity as market makers buy and hold stocks/shares/cryptos/options etc
- Market makers available on most major exchanges, including the London Stock Exchange (LSE)
Cons Of Market Makers
- Not all market makers offer brokerage services to retail traders
- Market makers can have conflicts of interest and may trade against you with limited price obligations
- Prices are determined by the market maker, possibly leading to wider spreads
- Limited FCA-authorised market maker brokers
How To Compare Market Maker Brokers
Financial Instruments
Brokers will be market makers for different assets on different exchanges, like the LSE, the AIM, Nasdaq OMX, ICE and LME. Choose a market maker broker that offers the assets you want to trade.
Fee Structure
Market makers typically make money through the spread, so look for a broker that offers tight, competitive spreads on your preferred assets. Also, keep in mind any other fees the broker charges, like overnight holding fees, deposit/withdrawal fees, inactivity fees, subscription fees and so on.
Finding the right balance between features offered and fees charged will allow you to maximise revenue while minimising costs.
Trading Platforms
The trading platform is one of the most important aspects to consider when choosing a broker. Platforms offer different features, with some, like MetaTrader 4 and MetaTrader 5, providing a fuller range of indicators and tools, while others aim to be intuitive and easy to use.
Select a market maker broker that supports a platform you are comfortable using, and where possible test drive it with a demo account so you can practice making trades on the platform without risking any capital.
Base Currency
Market maker brokers with GBP as their base currency are a good option for UK traders since they negate currency conversion fees. You may wish to access a market that uses a different base currency, but bear in mind that this may automatically lower the value of your deposit by applying a cost before you open a trade.
Regulation
Regulated market makers are usually safer to trade with than unregulated brokers as respected agencies like the FCA have strong fund protection measures in place, alongside corporate governance and other requirements. These include the separation of funds, negative balance protection, fund insurance and risk warnings explained.
How To Start Trading With A Market Maker Broker
- Choose a broker by comparing the list of available market maker brokers that trade your preferred assets. Refer to our guide above for the factors to consider when choosing between companies.
- Sign up by filling out the broker’s registration form, verifying your email address and uploading any documents or other necessary information.
- Fund your account using your preferred payment method. Check the broker’s payments page when you sign up to ensure you have a quick and affordable way to transact.
- Plan a trade by logging onto the platform or a chart site and using indicators and other analysis tools to identify the best time to execute a trade.
- Open your position by following the procedure on the market maker broker’s platform. This usually involves selecting the asset to trade from a list, choosing between a market and limit order, defining the volume you wish to open, and setting stop loss and take profit orders.
- Monitor market movements to make sure you are aware of price fluctuations and don’t miss the optimal time to exit your position.
- Close your position when you are satisfied with the profit you have made, or if you sense a trend reversal or want to limit your losses.
Bottom Line On Market Maker Brokers
Market makers play a key role in providing liquidity to financial markets, and without them, trading would be difficult. Brokers that are also market makers give traders access to this liquidity, facilitating quick trades directly with the broker. They also take their place in many different markets, including those trading real shares as well as CFDs.
There are numerous FCA-authorised and regulated market maker brokers available in the UK, with IG, for example, offering access to more than 18,000 markets. Although some market maker brokers can pose conflicts of interest, traders can find trustworthy firms that offer competitive fees and zero commission. Use our ranking of the best market maker brokers to get started.
FAQ
What Is A Market Maker?
A market maker is a firm or individual that quotes two-sided markets, offering bids, asks, and the market size of a selection of financial instruments. Since the market maker owns the assets in its inventory, it is ready to quickly provide them to traders, providing liquidity and depth to markets and facilitating seamless trading.
Do Market Makers Manipulate Prices?
Market makers control the prices they quote, and have no obligation to quote exact market prices. Instead, they typically profit from the bid-ask spread in the prices they quote.
Brokers that are also market makers may have a conflict of interest with traders, promoting assets that they make markets for with wider spreads to maximise their profits. However, this is not always the case due to rising competition, especially in OTC CFD markets.
What Are Market Maker Brokers Also Known As?
Market makers are also known as liquidity providers for their ability to bring large amounts of liquidity to the market as they can immediately buy/sell assets from their inventory of financial instruments. Both bid-ask spreads and the tradable volume is quoted by the broker, indicating how much liquidity for each asset is available.
What Are The Key Market Makers In The London Stock Exchange (LSE)?
Some of the major market makers on the London Stock Exchange include BNP Paribas, Standard Chartered and GMP Securities. The FCA list all authorised market makers and primary dealers in a document available on their website.
Do Market Maker Brokers Hold Stock?
Market makers do hold stock, allowing them to provide liquidity easily. Furthermore, brokers that are market makers are able to trade this stock directly to retail traders. This allows for trading at the quoted prices rather than paying a high commission fee.