[robbiep]

Market makers have an important function in providing liquidity even in the absence of underlying asset.

However this can create unusual and aberrant situations that certainly warrant raising these sort of questions in order to determine appropriate regulations and rules

[krageon]

This is an expensive way to say "they give you money maybe, even for nothing". That last part is the problem - if that is their core role, they should not exist. Even if they make some folks a lot (more) money.

[erincandescent]

Market Makers are basically the financial system's buffers: they exist to make sure that you can always buy or sell a given security/commodity. They are the people who make buying or selling something _immediately_ possible, rather than having to wait for someone who needs what you're selling (or is selling what you're buying) to come along.

This makes trades move quickly, which speeds up price discovery. This is good for market health.

Market makers make their money on the difference between the buy-sell spread. Of course, this is a bet: if the market moves against them, they can lose money on this. Often a market has one or more officially designated market makers who are paid to _always_ have a certain number of both buy and sell offers on the market to ensure that there is always liquidity. The payments help cover their risk

(These payments are often also materialized in the form of a "takers fee", i.e. a surcharge you pay whenever you place an order into the market which can be immediately filled)

TL;DR: They're a warehouse which will always buy and sell some product, except when talking futures we're talking wagons full of nickel 1 month from now and so the warehouse doesn't physically exist

[krageon]

What you're describing to me sounds like a scam. Of course this is a normal scam that everyone accepts as part of life, but that doesn't mean I have to feel the concept belongs in the modern world.

[kasey_junk]

Do you think bridge loans are a scam and should be removed from modern life? What about insurance?

Fierce competition by market makers mean that for commodities producers and consumers they don’t need to go to investment banks to get bespoke insurance & loan products. They can instead use the market extremely cheaply.

This means that it’s less risky to produce nickel or use it in industrial/commercial processes.

That in turn is not just an efficiency improvement it allows pricing oddities like this one to stay in the realm of wonky finance news. Without the exchanges and market makers the commodity supply chain would lurch and halt, and we’d have stories about how no smartphone batteries will be available in 2023.

[chii]

If it's as truly a scam as you seem to think, wouldn't you think it also strange that many participants willingly participate in this system?

It's not like there's a gun to the heads of producers and traders. Market makers are also usually not a single entity. Traders could trade amongst themselves in a different exchange that bans market makers. And yet no such exchange exists (as far as i know - except over the counter exchanges perhaps, which not many people use).

[robbiep]

I’m not here to argue the finer points of the merits or ethics of capitalism with you, but the fact is that under our current system they provide a very important and essential function. Your ideological approach to rebutting the facts as I stated them don’t change anything and in fact belie an immense ignorance of the functioning of the modern economy - you and all those who also decided to throw a downvote out of ignorance

[krageon]

While I recognise that they are a thing that exists (and this is not something you can change), you appear to claim:

A. To understand how the "modern economy" works

B. It cannot work without one system

Both claims are very big claims, and while they could be true they are nowhere near so obvious that you can say that it belies an "immense ignorance" to think that this system is bad.