Are market makers HFT firms?

Do market makers only operate in extremely liquid markets?

Are they there to provide liquidty or to make a quick buck?

@siva @nithin

Of course to make a buck. :slight_smile:

They will be operate in any market where they can make a market without taking directional risk on the underlying. For example, there is market making in ETFs in India. It is not a very liquid market. But if you place an order to buy ETF at a price which is slightly above the theoretical price of the underlying (after covering for impact cost), they will buy the 50 stocks as a basket and sell it to you.

But if there is no way to hedge the directional risk, they won’t participate. Lesser the liquidity, the more market makers earn.