Essentially, market makers ensure Forex operations carrying out currency exchange transactions that are initiated by the market participants independent of the existing conditions. If a Forex trader wants to effect a BUY transaction regarding the specific currency pair, the market-maker will have to ensure selling of the required quantity of base currency of this currency pair to such a trader. If a Forex trader wants to effect a SELL transaction regarding the specific currency pair, the market maker will have to do everything possible in order for this transaction to be effected, ensuring buying the required quantity of base currency of the corresponding currency tool from the trader.
Market-makers regularly carry out Forex transactions under currency pairs (tools) that they themselves quote. It can be said that market makers seem to «maintain» the market regarding specific currency pairs, risking their own funds to a certain degree since they are forced to carry out Forex transactions in the situations when traders, acting en masse, want to buy or sell. Speaking in other words, the market maker has to take the position that is opposite to the trader's position that declared its intent to carry out a specific transaction (BUY or SELL).
Usually, quite large banks that specialize in currency exchange operations regarding these or other currency pairs (currency tools) act in the role of market-makers. Particularly, continuous presence of market-makers substantially stipulates the stability of this market, as well as the same ideal liquidity that is often spoken about.
As it was mentioned before, a market maker that takes upon himself obligations regarding provision of market liquidity is forced to buy currency from traders in the situation when its rate has a tendency to decline, or sell currency to traders in the situations when its rate grows. This fact assumes significant risks for the market-maker that it compensates by means of charging a spread (difference between ASK and BID rates). The market-maker charges a certain amount of spread from the trader who opened this or another Forex transaction regarding a currency pair quoted by this market-maker. This way, spread is a well-deserved income received by the market-maker.