  The continuous-time version of Kyle's (1985) model is studied, in which
market makers are not fiduciaries. They have some market power which they
utilize to set the price to their advantage, resulting in positive expected
profits. This has several implications for the equilibrium, the most important
being that by setting a modest fee conditional of the order flow, the market
maker is able to obtain a profit of the order of magnitude, and even better
than, a perfectly informed insider. Our model also indicates why speculative
prices are more volatile than predicted by fundamentals.
