How does market makers prevent against adverse selection?

[Maverick74]

Quote from newwurldmn:

They make markets in stocks by appointment to customers. Some of it gets crossed. Most of it gets worked in the open market.

I used to work in that group. But it was largely a loss leader for agency business.

Right in that way we are ALL market makers. I put out offers by appt as well.

My comments were geared towards the idea that any bank is stupid enough to tie up obscene amounts of cash to engage in a business with no edge by making two way markets in GOOG. LOL.

 

[newwurldmn]

Quote from Maverick74:

Right in that way we are ALL market makers. I put out offers by appt as well.

My comments were geared towards the idea that any bank is stupid enough to tie up obscene amounts of cash to engage in a business with no edge by making two way markets in GOOG. LOL.

Banks make two way markets all the time.
They do it in stocks. They do it in treasuries. They do it in CDS. They do it in lots of products.

Some even have proper desks that deal with the exchanges (Barclays, Goldman, citi)

Typical conversation (in case you never traded this way):

Customer: where do you make 100k goog
Bank: 955 at 956
Customer: i buy 956.

Bank then proceeds to do better in the market.

LOL.