U. S. Securities and Exchange Commission (SEC) defines market maker as:
"A market maker is a firm that stands ready to buy and sell a particular stock on a regular and continuous basis at a publicly quoted price. You'll most often hear about market makers in the context of the NASDAQ or other "over the counter" (OTC) markets [...] Market-makers generally must be ready to buy and sell at least 100 shares of a stock they make a market in. As a result, a large order from an investor may have to be filled by a number of market-makers at potentially different prices."
It looks like when a broker receives order from their clients, they might route an order to a market maker in the NASDAQ market (or to several of them if the have agreements with them?)
What makes me confused is the price quoted by market makers. To who exactly they quote ask/bid prices. Are those prices at which a market maker is willing to buy to / sell from other market makers (if market markets trade with each other) or the prices at which they would accept orders from their clients -- brokers?
What orders (for example, when deciding the price of the last order) are seen publically? The order between two market makers? If one market maker just matches two opposite orders (one broker buys x stocks at y price, the other sells x stocks at y price), will it be seen for NASDAQ? What if the broker does not route the order to market maker, but do the same matching/cancelling out procedure for its clients - individual traders?
ECNs seem to be another type on participants in NASDAQ. Who does ECN trade with? Brokers? Market Makers?