Market maker
A market maker is a participant that continuously quotes both a bid and an offer on an instrument, earning the spread while managing the inventory it accumulates, and adjusting or cancelling those quotes as conditions change. Much of the resting size and much of the cancellation traffic visible in an order book comes from this activity.
Senzoukria · Glossary · Updated September 2026
Role in the order book
A market maker posts passive limit orders on both sides of the market. When an aggressor hits the offer, the maker is short and needs to buy back; when an aggressor lifts the bid, the reverse. The business is the spread captured across many round trips, minus the losses taken when inventory moves against the quotes.
Because the quotes are a function of the maker's inventory and of the current fair value estimate, they move constantly. A quote that was correct one tick ago is cancelled and reposted when the mid-price shifts. That behaviour is normal and is not, by itself, an attempt to mislead anyone.
- Two-sided: bid and offer at the same time, usually close to the touch.
- Inventory-sensitive: quotes lean away from the side where the maker already holds too much.
- Short-lived: cancelled and reposted as price or volatility changes, which is the source of requoting.
Why it matters for reading order flow
- Order flow imbalance measures the net change in size at the best bid and best offer. Market-maker quoting is a large part of those changes, so an OFI reading reflects quote management as much as directional demand.
- On a heatmap, a band that flickers a tick above or below price and never trades is often quoting activity following the market rather than a level being defended.
- The distinction between withdrawn and executed liquidity separates the maker's quote management from actual absorption by resting orders.
In Senzoukria
The heatmap screen's Liquidity tracker panel reports, per price level, how much liquidity was withdrawn without trading and how much was executed. Its note states explicitly that withdrawn includes normal market-maker requoting, cancelling to repost a tick away, and that the panel distinguishes withdrawal from execution without calling withdrawal deceptive.
That panel requires the order-by-order feed; on an aggregated feed the app does not attempt to attribute cancellations to any participant type. Identity of individual participants is never observable from market data.
Common mistakes
- Labelling cancellations as spoofing. A cancelled quote is observable; intent is not.
- Assuming a large resting order belongs to a market maker, or to anyone in particular. The feed carries sizes, not identities.
- Reading requoted size as fresh interest each time it reappears. The same quote moving one tick is not new demand.
Related
- Order flow imbalance (OFI) explained
- Liquidity heatmap explained
- Heatmap
- Requoting
- Aggregated depth vs order-by-order
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Frequently asked questions
- How does a market maker make money if it never takes direction?
- By buying at the bid and selling at the offer repeatedly, keeping the spread on each completed round trip. The risk is inventory: when price trends, the maker accumulates a position on the wrong side and has to unwind it at a loss. Quote placement and cancellation are how that inventory risk is managed.
- Can I identify market makers on the DOM or heatmap?
- Not as identities. Market data carries prices and sizes, and on an order-by-order feed the life of each order, but never who submitted it. What you can observe is behaviour consistent with quoting: two-sided size near the touch that moves with price and rarely trades.
- Why does so much depth vanish without ever trading?
- Because quotes are repriced as the market moves. A maker whose fair value estimate shifts by a tick cancels and reposts at the new level. Over a session this typically produces more cancelled size than executed size, which is what the withdrawn versus executed split makes visible.