Thank you all for contributing. I stated in my first post I have a few years experience working for a MM firm. I understand that it will be very difficult to compete with my old firm and their competitors. I do know that there are differences between MM options on bonds and stirs vs indices, fx, commodities and etc but I do not believe there is much difference between MM options on indices or stocks or fx or commodities like gold.
options market making, seed capital
- Thread starter mmt
- Start date
I could only guess. If there is a trade for 1000 lots when most trades are for less than 10 lots then I will assume it is a broker trade.
I would want to make markets where 75% is traded off the screen. Even is 10% is traded off the screen I would probably be uncomfortable. It would have to be in the low single digits. I know, people will say that this will limit the number of markets I can trade.
I would want to make markets where 75% is traded off the screen. Even is 10% is traded off the screen I would probably be uncomfortable. It would have to be in the low single digits. I know, people will say that this will limit the number of markets I can trade.
On many of these option exchanges, the broker routing the order, getting paid for order flow, can route their order to a DMM. That DMM for having the order flow directed to that exchange gets preference on those orders. EG. Directed order to the AMEX are offered 40% of the order. That leaves very little for the other MM. Just not a business worth going into anymore. Also, equity options are traded on 9 option exchanges, so you can miss the order that way too. At least ES option are traded in one place. If I wanted to make market electronically, I would build my business around that before SPX or equity option. No SEC or FINRA. No expensive membership and trading permit. You just register with the NFA and lease a seat. Last I looked, those leases were around $350/month.
Thanks for the input. The concern I have with the ES is that a large chunk of the S&P volume goes through on the pit. Now, not only do I have a speed problem, I could even get arbitraged against the pit.
Yes, I would need to hire/partner with someone to be in the pit and we would need to be giving each other continuous feedback.
I am in the process of setting up my MM operation.