Jamil Nazarali, senior managing director and global head of electronic trading at Knight, has some insightful comments in Traders magazine about the role of market makers in events such as May 6 and in the future. The article begins:
"On May 6, there was no one who had enough liquidity to be buying from every seller. I don't think you can mandate someone to be there all the time. However, I think you can provide incentives to be in the market more. Incentives could be in rebate form, or relief around short sales. I think one example is the NYSE's DMM and SLP program--where they said, "We'll provide economic incentives to be at the inside. And if you are a supplemental liquidity provider and come on our platform at the inside at 'x' percentage of the time, we'll give you an enhanced rebate." And guess what happened? Lots of people came on their platform, and they started adding a lot of liquidity, and that resulted in an increase in NYSE market share. If you provide those types of incentives, people will respond to them and the market will be better off."
The complete article (just a few paragraphs, and very read-worthy) is here.