A market maker tries to keep market neutral, but obviously that's impossible to do continuously. So they try to limit their exposure by being hedged all the tim

A market maker tries to keep market neutral, but obviously that's impossible to do continuously. So they try to limit their exposure by being hedged all the time. The simplest hedge is obviously to hedge a stock against itself and thus not hold any inventory, but that is often impossible. A different way of hedging would be to hedge against correlated stocks based on a model you have. For example, a market maker could see stock A and B be quoted at a certain price, and because they have some correlation with stock C, the market maker can quote stock C based on the price of A and B; knowing if they get filled on their quote with C, that they would be fast enough to get a hedge in A and B. Conversely, if quotes for A or B move, they know they can be fast enough to adjust their quote for C. If markets did not trade continuously, there would be no (soft) guarantee to the market maker that if they got filled on C that the quotes for A and B would still be there, and thus you would see less liquidity in all stocks because of this.