I don't think market makers spend their day entering spreads. The prices change faster than a human can type and there is too much at stake to risk a mistake. Can someone please explain how market makers update quotes so quickly and accurately? Is it algorithmic with occasional manual adjustments to the spread?
The Market Maker is a special type of exchange member who has an obligation to continuously provide quotations in the securities that he is appointed.
In exchange for the obligations, they also get some benefits, such as lower execution fees (or rebates), and/or the use of a market maker specific API (application programming interface) used to communicate with the Exchange's computer systems. Often these interfaces provide higher throughput and more sophisticated risk controls than a typical order entry interface used by other exchange members. The risk controls will do things such as remove the market maker's quotes automatically if an unexpectedly high number of executions occur.
Please explain how market makers update quotes so quickly and accurately?
These days market makers use their own computer software to calculate prices to buy and sell a given security that can quickly update their quotes without human intervention as market conditions change rather than enter prices by hand. Not only is manual entry prone for 'fat finger' errors, but it would be costly employing staff who can maintain the quotes by hand. That is not to say manual market making still exists - some exchanges still maintain a trading floor for certain securities such as CBOE's SPX pit for options on the SPX index, and the New York Stock Exchange's floor where the Specialist (another name for market maker) may be involved in larger trades (smaller trades are executed automatically through the electronic system).
Is it algorithmic with occasional manual adjustments to the spread?
Yes. It is algorithmic, but staff are employed to supervise the algorithm making manual adjustments (to the algorithm(s) parameters as needed)
Because market makers are exchange members, they tend to get their market data directly from the exchange rather than through third party market data services such as Bloomberg.
There may be more than one market maker in a given security, making the market more competitive and providing more liquidity.