What is a market maker?

A market maker or liquidity provider is a market participant engaged in placing quotes on both sides of the market, and it can be:

• Contracted by the exchange (Designated Market Maker) - earning a fee and potentially also making a profit from the bid-ask spread, and it is obliged to maintain quotes on both sides of the market;
• Non-contracted by the exchange - making a profit out of the bid-ask spread, and may stop market making whenever it desires.

Many of the market making activity is pursued by HFT.