Uh....no. Market makers were REQUIRED to make markets. HFT's are NOT. That is a BIG difference. In fact, it makes the entire comparison moot.
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How does market makers prevent against adverse selection?
- Thread starter beefcaketrade
- Start date
Uh....no. Market makers were REQUIRED to make markets. HFT's are NOT. That is a BIG difference. In fact, it makes the entire comparison moot.
Quote from Maverick74:
Uh....no. Market makers were REQUIRED to make markets. HFT's are NOT. That is a BIG difference. In fact, it makes the entire comparison moot.
Being a proper MM and provider of liquidity has little difference, it's only one of obligation as you pointed out. The latter is basically a MM who does whatever he/she wishes.
The vast majority of MMs within banks are electronic now and they're bound by the same exchange rules as you pointed out. Look bottom line when you're sitting inside of bank, your function is to make money - there's nothing stopping someone with MM status to quote wide either.
Quote from slickpick:
Being a proper MM and provider of liquidity has little difference, it's only one of obligation as you pointed out. The latter is basically a MM who does whatever he/she wishes.
The vast majority of MMs within banks are electronic now and they're bound by the same exchange rules as you pointed out. Look bottom line when you're sitting inside of bank, your function is to make money - there's nothing stopping someone with MM status to quote wide either.
The vast majority of banks are NOT making markets. Banks trade structured products. They are not putting up bids and offers on GOOG. Quoting a wide market is very different then no market. Ask anyone who was looking for liquidity during the flash crash. If I don't HAVE to make a market, then I'm not going to get run over. Market makers got run over all the time because they were obligated to provide a quote.
If you want to read about exactly how traders inside banks execute HFT and market maker "lite" strategies I highly suggest the book "Street Freak". You'll enjoy it.
Virtually every bank is a market maker on the ISE for equity options.
Many banks make markets on cash/listed/flow products on exchanges.
And virtually every bank makes on demand markets to their customers (where do you make 100k goog)
Many banks make markets on cash/listed/flow products on exchanges.
And virtually every bank makes on demand markets to their customers (where do you make 100k goog)
Quote from Maverick74:
The vast majority of banks are NOT making markets. Banks trade structured products. They are not putting up bids and offers on GOOG. Quoting a wide market is very different then no market. Ask anyone who was looking for liquidity during the flash crash. If I don't HAVE to make a market, then I'm not going to get run over. Market makers got run over all the time because they were obligated to provide a quote.
If you want to read about exactly how traders inside banks execute HFT and market maker "lite" strategies I highly suggest the book "Street Freak". You'll enjoy it.
Quoting wide is basically the same thing as telling someone to go fuck off and even if those quotes do get traded, it's free money.
Quote from newwurldmn:
Virtually every bank is a market maker on the ISE for equity options.
Many banks make markets on cash/listed/flow products on exchanges.
And virtually every bank makes on demand markets to their customers (where do you make 100k goog)
Options....yes.
Structured products....yes.
Shares of GOOG.....no.
Dark pools of liquidity (where 100k shares of GOOG gets posted)is crossed internally with another customer. That is not the same thing as sitting on a bid or offer on GOOG. Shit, would you do that newwurldmn? Of course not. If I had shares in house and GOOG was trading at 950.50, would I offer 100k at 955? Sure. So would you. Hell, I'll do that in an IB account. I just won't get lifted. LOL.
Quote from slickpick:
Quoting wide is basically the same thing as telling someone to go fuck off and even if those quotes do get traded, it's free money.
You obviously have never made a market in options before. Our biggest losses on the floor were quoting wide markets. Our DPM lost 1 million in a single day when NSOL popped 100 pts intra-day. We were making dollar to 2 dollar wide markets in options that were normally 1/4 to 1/2 pt wide. Never saw so much red in my life. It was brutal. We couldn't even get the damn stock because it's spreads were 2 to 3 dollars wide. No, it most certainly is NOT free money.
Quote from Maverick74:
You obviously have never made a market in options before. Our biggest losses on the floor were quoting wide markets. Our DPM lost 1 million in a single day when NSOL popped 100 pts intra-day. We were making dollar to 2 dollar wide markets in options that were normally 1/4 to 1/2 pt wide. Never saw so much red in my life. It was brutal. We couldn't even get the damn stock because it's spreads were 2 to 3 dollars wide. No, it most certainly is NOT free money.
Dude you're all over the place, one second you're talking about cash equities the next you're talking about options.
Quote from Maverick74:
Options....yes.
Structured products....yes.
Shares of GOOG.....no.
Dark pools of liquidity (where 100k shares of GOOG gets posted)is crossed internally with another customer. That is not the same thing as sitting on a bid or offer on GOOG. Shit, would you do that newwurldmn? Of course not. If I had shares in house and GOOG was trading at 950.50, would I offer 100k at 955? Sure. So would you. Hell, I'll do that in an IB account. I just won't get lifted. LOL.
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.