A true MM strategy quotes both sides, does not use stops and has the ability to take on a position for a directional lean.
Becoming a market maker
- Thread starter Adar
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A true MM strategy quotes both sides, does not use stops and has the ability to take on a position for a directional lean.
True. MMs operate as wholesalers... the "other side" of the (retail) trade. Combined with MM regs, such as ability to carry simultaneous short and long positions (for mostly indefinite periods of time) creating a NET position, the strategies allowed to be used can be significantly different with many more alternatives than the retail side.
They also have some significant limitations: the MM business is very low ROE compared to a prop desk, so they have be very careful with the pennies they spend.
The obligations of market makers can sometimes be difficult. Do you really want to be quoting options as a stock's earnings are coming out and every hedge fund has the inside scoop?
Guys, thank you for all your replies but I would like to point out that this thread was created to dicuss a career in market making not strategies market maker may use (and will never disclose to outsider).
Please let's stick to the topic of the thread and if needed create another thread with respect to the trading and risk management strategies a market maker is using.
Please let's stick to the topic of the thread and if needed create another thread with respect to the trading and risk management strategies a market maker is using.
A) MMs **choose** (and pay associated fees for the right) which markets they MM in.
B) MMs **set their price quote** based on their inventory (which suggests a strategy has been employed) and/or their expectation. Quoting away from the market is completely valid.
C) Extremely unlikely a true MM operation makes individual decisions based on ROE. They have ability to be simultaneous long and short for a net position. Net flat is not the same as not having a position.
CME group doesn't have a designated market maker scheme, pretty sure ICE does for certain products (not 100% sure though).
Difficult to say for sure who makes markets in specific products unless you work for said organizations (this information likely falls under firm specific trade secrets).
Specifics vary from firm to firm. Each will require an undergrad degree at a minimum, keep in mind if you only meet the minimum academic requirements you better have some great extra curriculars and kill it on the interviews. Check out HTG (actively seeking OTC MM's) and DRW (HFT prop firm).
If you're applying to be a junior trader/intern for an MM/HFT firm they expect a strong academic background in a quantitative/computer science related program.
I'd recommend trading your own account and maintaining a track record as it demonstrates; initiative, genuine interest in trading, and risk taking (successful or otherwise).
Be prepared for a tough screening exam from all of your target firms as well, tradertest.org is a good resource for the arithmetic portion of the exam but expect statistical, technical,and brain teaser type questions.
