Forex glossary
Market maker
A market maker quotes buy and sell prices and transacts as counterparty. It may retain exposure or hedge externally; the quoting role is not synonymous with B-book. Execution terms and conflicts of interest require assessment of the provider's agreement and actual practices.
Illustrative example
How does it work in practice?
A hypothetical CFD market maker quotes bid 1.1000 and ask 1.1002 USD per EUR. After selling the client 1,000 EUR of exposure, it may make its own hedge purchase while remaining the client's counterparty.
A case to work through
Hedging changes, role remains
Model: a provider quotes bid and ask and contracts for CFDs; it hedges 80% of net exposure today and 100% tomorrow.
- It remains the client counterparty under the same agreement on both days.
- The hedged share changes, rather than the quoting role itself.
What follows? Assess these two model dimensions separately.
Example boundary: These percentages are hypothetical and do not establish execution quality.
A useful distinction
Market maker / B-book
B-book describes retained exposure; market maker describes quoting and counterparty roles.
Check your understanding
Separate the quoting role from a hedging decision.
Show the answer and explanation
No, it is a separate exposure decision
Contractual parties remain those named in the agreement.
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Read the fuller explanation
Related terms
Sources and documentation
- FCA — CP16/40, Chapter 2: CFD provider business models
Historical consultation, sections 2.2 and 2.9: the CFD counterparty and external hedging are separate matters. This is not evidence of current leverage limits.
Document read:
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.