What is designated market making?
A designated market maker (DMM) is a firm contractually committed to keeping a specific token tradeable: continuously quoting both a buy and a sell price, at an agreed maximum spread and minimum depth, around the clock. Here's how it works and why exchanges demand it.
The mechanics: two-sided quoting
At any moment, the market maker places both bids (buy orders) and asks (sell orders) around the current price. Traders who want to buy or sell instantly trade against these resting orders. The MM earns the spread — the small gap between its buy and sell price — in exchange for taking the risk of holding inventory while prices move.
Without a market maker, a young token's order book is thin: a $20k market sell can move the price several percent, spreads gape overnight, and every chart looks like a heartbeat monitor. That volatility scares off exactly the traders and holders a project wants.
The three numbers that define the job
| Metric | What it measures | Typical commitment |
|---|---|---|
| Spread | Gap between best bid and best ask | ≤ 0.5–1.0% for small caps, time-weighted |
| Depth | Resting liquidity within ±2% of mid-price | A fixed dollar amount per side |
| Uptime | Share of time two-sided quotes are live | 95–99%+ |
These are the only metrics an honest market maker commits to — because they are the only ones it controls. Volume and price come from the market. A firm promising those is offering manipulation, not market making (how to spot the difference).
Why exchanges require a designated MM
Exchanges are judged on the quality of their markets. A token that lists and immediately trades with a 3% spread damages the venue as much as the project. That's why listing reviews at serious exchanges include the question "who is your market maker?" — Binance now requires public disclosure of issuers' MMs, and mid-tier venues typically require the issuer to bring a funded market-making setup before the listing goes live.
DMM on CEX vs. DEX
On centralized exchanges, the MM quotes in a traditional limit order book via APIs. On decentralized venues the same role exists with different plumbing: managing concentrated liquidity ranges on AMMs, quoting on on-chain order books, and keeping prices consistent across chains and venues (so arbitrageurs don't drain the project's pools). A modern token — often live on one or two CEXs plus DEX pools — needs both handled coherently.
What it isn't
- Not price support. An MM cannot hold a price against real selling pressure — and attempting to is manipulation.
- Not volume creation. MMs enable volume; they don't manufacture it. Manufactured volume is wash trading.
- Not a growth hack. Liquidity makes a good token investable. It doesn't make a bad token good.
Want to see what a real DMM commitment looks like on paper? Our term-sheet template spells out KPIs, remedies and exclusions — free for founders to use as a benchmark.
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