What a market maker actually does for a token project
If you are preparing a token for an exchange listing, you will hear the same requirement from most venues: bring a market maker. Here is what that role actually involves, what you are paying for, and how to judge whether it is working.
The job in one sentence
A market maker keeps buy and sell orders resting on both sides of your order book at all times, so anyone who wants to trade can do so quickly, at a fair price, without moving the market.
Why exchanges ask for one
An exchange's reputation depends on its markets working. A new listing with a wide spread and an empty order book frustrates traders, attracts manipulation and reflects badly on the venue. Requiring a market maker is how exchanges make sure every listing has a minimum standard of liquidity from the first day.
That standard is usually written as KPIs: a maximum spread, a minimum depth within a price band, and a minimum uptime. We cover each of these in our guide to market-making KPIs.
What you are paying for
- Liquidity to an agreed standard, on the pairs and venues you choose.
- Exchange coordination: accounts, fee tiers and the conversations that get you listed and keep you compliant.
- Operations: custody arrangements, trading keys, monitoring and incident response.
- Reporting that lets you check every KPI yourself.
What a market maker should not do
A market maker should not promise a price. Liquidity makes prices more efficient. It does not set them. Be wary of anyone who offers price targets, guaranteed volume or "support levels". Those offers usually mean wash trading or manipulation, and they put your project and your listings at risk.
Questions to ask before you sign
- Which KPIs will you commit to, and how will I see them?
- Who holds the assets, and can trading keys withdraw funds?
- How is the fee structured, and what happens to trading returns?
- Who on your team will actually watch my market?
- How do either of us exit the contract?
Clear answers to these five questions tell you most of what you need to know about a market maker.