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We study why many financial markets voluntarily employ contracts by which a “designated market maker ” precommits to provide more liquidity than she would otherwise choose, and identify two reasons that such affirmative obligations can affect welfare. The first relies on the insight that the asymmetric information component of market-making costs comprises a transfer across traders, not a social cost to completing trades. As such, this cost dissuades efficient trading, which a restriction on spread widths encourages. Secondly, a restriction on spread widths encourages more traders to become informed, which speeds the rate at which market prices move toward true asset values. This analysis implies that designated market makers can enhance efficiency primarily when information asymmetries are important, not simply when liquidity is expensive or trading is sparse. Researchers have, at least since Demsetz (1968), emphasized the importance of liquidity in financial markets. Liquidity can be supplied through quotations in a dealer market or limit orders in an auction market. Liquidity demanders typically pay liquidit