I am trying to understand the role of a market-maker. So, the best bid and offer depend on where orders are resting, and these orders are from retail investors or institutions or whoever. Why is it said you buy from the market-maker when you issue a market order? Are you not just buying shares from the guy who had the best offer?
I understand this would make the stock very illiquid seeing as most market participants are likely to only place orders in areas of structure like swing highs and lows and the spread would be all over the place, so do market makers themselves place orders on the bid and ask to keep the stock liquid?
If market-makers hold inventory in a stock, is this done as soon as the company floats? Do you sell all your outstanding shares to market-makers who then sell it on?