If your broker takes the other side of your trades, what protects you most?

Strong regulation and a licence

Market makers and brokers

Whenever you tap buy, someone has to sell to you, even in a quiet market late at night. Often that someone is a market maker.
A market maker always quotes two prices: a bid to buy from you and an ask to sell to you. It earns the gap between them, the spread, again and again.
Say it quotes a share at US$50.00 bid and US$50.02 ask. If it buys and sells 1 million shares a day, that 2-cent gap earns about US$20,000, before costs.
It isn't free money. If prices jump while the market maker holds shares, it can lose. That's why spreads widen when markets get wild.
Your broker is the shop you trade through. Some brokers pass your order to an exchange or to other market makers. Others act as market maker themselves and take the other side of your trade.
Common mistake
Myth: "A broker that takes the other side must be cheating." It's a conflict of interest, since your loss can be its gain. But licensed brokers must still give fair prices and manage that conflict.
Key takeaway
Market makers keep markets liquid and earn the spread. Know how your broker handles your orders, and use only a licensed one.

A market maker earns mainly from... The spreadIt buys at the bid and sells at the ask, keeping the small gap many times a day.
Market makers help markets by... Always being ready to tradeBecause they always quote a price, you can usually buy or sell at once, even when few others are trading.
If your broker takes the other side of your trades, what protects you most? Strong regulation and a licenceA licence means a regulator checks that prices are fair and that client money is protected.
Why do spreads often widen in wild markets? Market makers face more riskPrices can jump before a market maker can pass on what it bought, so it asks for a bigger gap to cover that risk.