Roles: Market Maker vs. Arbitrageur vs. Speculator
The clearest way to tell these roles apart is to ask what each is being paid to bear. Every profitable strategy is compensation for taking on something other people want to avoid.
Read the middle row first. What a desk is paid for follows from what it agrees to carry.
Market maker: paid for immediacy
A market maker quotes both sides continuously, buying at the bid and selling at the ask. The spread is the fee for letting everyone else trade whenever they want.
What they bear: adverse selection. Anyone can trade against your quote, including someone who knows something you do not. If a stock is about to be taken over, you will be the one selling it cheaply. The whole craft is charging enough spread to cover the informed flow while staying tight enough to win the uninformed flow.
Market makers do not want a view. They want to be flat, collecting spread and hedging exposure. Inventory is a byproduct to be managed, not a position to be held.
Arbitrageur: paid for speed and complexity
An arbitrageur exploits price differences between related things: the same asset on two exchanges, an ETF against its basket, a future against spot.
What they bear: execution risk, not price risk. True arbitrage is riskless in principle. In practice you might fill one leg and miss the other, or the opportunity vanishes in the milliseconds it takes to react. Getting one leg of a pair trade is how an arbitrage becomes a speculation you never wanted.
Opportunities are small and disappear fast, so this is an infrastructure business. The edge is in being first.
Speculator: paid for taking risk
A speculator takes a directional view and holds it. Long if they think it goes up, short if down.
What they bear: the actual price risk, which is what everyone else is trying to shed.
This is the highest-variance role and the least common at prop firms that hire graduates. It is hard to teach, slow to evaluate (a good year may be luck, and it takes many years to distinguish), and hard to risk-manage. A market maker's skill shows in weeks; a macro trader's may take a decade to establish, as the power calculations in the statistics course show.
Market makers are paid for providing immediacy and bear adverse selection. Arbitrageurs are paid for speed and bear execution risk. Speculators are paid for bearing price risk itself. Knowing which risk you are being compensated for is the start of understanding any strategy.
What this means for your career
Almost every graduate hire at IMC, Optiver, Flow Traders, SIG and similar firms starts in market making. The reasons are practical: it builds pricing intuition fastest, it generates enough decisions per day to evaluate someone in months rather than years, and it teaches risk management by direct experience.
From there, paths diverge. Some traders move toward automated strategies and research, some toward more discretionary or relative-value trading, and some stay in market making, which is where the bulk of the revenue is.
In an interview, "which role appeals to you" is a real question with a real best answer for graduate roles: market making, and you should be able to say why in terms of what you would learn.
The distinctions blur in practice. A market maker who skews quotes because they expect the price to drift is speculating a little. An arbitrageur holding one leg overnight has taken a position. The categories are useful for understanding compensation for risk, not for drawing hard boundaries around desks.