Stock exchanges assign securities to various members of the exchange. These members are called "specialists"; it's their job to make a market in the security, by processing buy and sell orders fairly and efficiently.
To keep orders flowing smoothly, specialists will buy and sell the security for their own account. The specialists profit from the spread, which is the difference between the buy and sell (or bid/ask) price of the security. A market order authorizes the market maker to complete the order at the posted spread trading for his own account if necessary. A limit order offers him another price which he may decide to accept or not at his option.
Related Fool Articles
- [link link title]
Recent Mentions on Fool.com
- Best Stocks to Buy: Another Beaten-Down Industry I'm Buying
- Hold Your Horses, IDEXX Laboratories, Inc. Earnings Are Better Than They Appear
- Why NetSuite Inc. Stock Plunged Today
- Give MasterCard Extra Credit for a Strong Quarter
- Raytheon Company Reports Earnings: Why I Own It -- and Why I Regret It
- 5 Things Citrix Systems, Inc. Management Wants You to Know