Professional market maker (options) software?

[spreadem]

Quote from nitro:

I am 99% sure you can do this in ORC from the standpoint of writing the system in it's language (Java for ORC liquidator). The last question I asked above is important because unless ORC supports the way you need to execute the orders, just being able to generate the theoretical values within ORC will do you no good unless the those theoretical values can be turned into order(s) either to your broker or directly to an exchange. If the order(s) are infrequent, you can do it by hand by entering in the order in whatever front end you use right now. As soon as you start autoquoting with any frequency you have to have connections to exchanges and/or broker API, and knowing that is the crux of my last question. See, ORC or any software for that matter does not support every conceivable API to route orders to an exchange. You may be confusing being able to program a model (for spreads of whatever), and being able to get the orders that are generated by that model into an exchange automatically. The former is almost certainly possible in ORC, the latter is what is in question in your case. If you said to me, I have an IB account, I would say we have to see if ORC has an IB adapter. If you said, I have direct access to the ECNs and Globex, I would say, ORC will work out the box. Etc.

Even if ORC did not do it out of the box, it could be amended by custom sofware that would get you the rest of the way.

I have built a simple software (autospreader) that does exactly what you want (I have models that trade in "identical" ways to yours), but it is not commercial software in that it is easy to use by an end user. It is meant to be used by a programmer. Even in ORC, you would be required to know some Java, or hire someone that does.

You’re so right … Great insight nitro. I am trying to figure out how to automate a “model” which gives pair trading opportunities intraday. I’d like to automatically cancel and replace quotes dynamically as the market changes dynamically.

 

[nitro]

Quote from spreadem:

You’re so right … Great insight nitro. I am trying to figure out how to automate a “model” which gives pair trading opportunities intraday. I’d like to automatically cancel and replace quotes dynamically as the market changes dynamically.

Ok good spreadem.

So then the only way I can answer the question is, who is your broker? Or do you have direct connection to the exchanges that you need?

If you call ORC they will ask you the same questions. Now that you have thought this through, you are better prepared to call them.

 

[spreadem]

Quote from nitro:

Ok good spreadem.

So then the only way I can answer the question is, who is your broker? Or do you have direct connection to the exchanges that you need?

If you call ORC they will ask you the same questions. Now that you have thought this through, you are better prepared to call them.

I trade futures thru Velocity and equity options with thinkorswim.

I will entertain a broker that will give me direct access to ecns as well as futures to employ these strategies.

 

[nitro]

Quote from spreadem:

I trade futures thru Velocity and equity options with thinkorswim.

I will entertain a broker that will give me direct access to ecns as well as futures to employ these strategies.

You sound extremely flexible. I strongly recommend that you contact ORC because you are very likely to be able to do what you want to do with your good attitude and open mind.

 

[TradeAlone]

Quote from nitro:

Or write your own mass quoter. My MQ is already certified to mass quote into the CBOE using FIX (not CMI). A couple of other important features and it is good to go. It has the key important feature, it is client server and is distributable. It will be much faster than ORC.

Don't forget that the software is only part of the cost of MMing. Leasing a seat is required to quote into an options exchange. CBOE seat lease is at the time of this writting another $10K/M. Then you need a datafeed, and connectivity into the CBOE or other exchanges quote engines...

So in order to break even as an options MMer using ORC Liq, you have to make ~35K/M. With my MQ that break even goes down to $15k/M at the CBOE.

 

[TradeAlone]

Hi, nitro,

Doesn't IB provide you direct access to exchanges? Why do you need to get a seat for CBOE or other exchanges?

I'm interested in your mass quoter, is this something one can build with IB's API? Any background info for writing this kind of software? Are you able to quote multiple stikes of multiple symbols without much latency?

Thanks!

 

[cvds16]

you are not allowed to quote as a retailer on American exchanges and furthermore have to pay cancellation costs which will heavily eat into your profits there will be none left.

 

[Occam]

Quote from cvds16:

you are not allowed to quote as a retailer on American exchanges and furthermore have to pay cancellation costs which will heavily eat into your profits there will be none left.

My info may be out of date, but I seem to recall that at least as recently as few months ago, neither NASDAQ nor ARCA charged cancel fees on US equity options orders, and NASDAQ Options took it even further by explicitly stating that any trader can make a two-sided market on their exchange on any such options trading there.

Of course, the spreads on such options series seem to be much tighter, so caveat venditor

 

[nitro]

Quote from occam:

My info may be out of date, but I seem to recall that at least as recently as few months ago, neither NASDAQ nor ARCA charged cancel fees on US equity options orders, and NASDAQ Options took it even further by explicitly stating that any trader can make a two-sided market on their exchange on any such options trading there.

Of course, the spreads on such options series seem to be much tighter, so caveat venditor

Quoting into the PHLX options engine (which was bought out by NASDAQ) costs about $4K/M (it is complicated, you can quote certain things and probably get it down to $2k/M but this allows you to quote equity options everything.) That is considerably less expensive than the CBOE, and lots of people do it for that reason. Generally the CBOE is by far the most expensive options exchange to do business in. But that wouldn't last long if it weren't an advantage to both sides, the MM and the client. CBOE is starting "C2" that will look very much like the other options exchanges, and will likely have different economics than the CBOE of now.

I forget what the costs if any to quote into the new NYSE/ARCA options exchange. I will find out.

 

[optionsgeek]

Nitro,

Sounds like you have been looking at this space in detail. Writing a mass quoter is big deal - lots of moving parts.

You say you are doing this in FIX - don't you find that message latency makes it hard to keep up with the market? How many option chains/underliers can you handle simulatenously?

Who's your market data provider? I've never had a provider yet who hasn't disappointed. Have you looked at hardware accelerated solutions at all? What technology platform are you writing this in? Did you write your own pricing analytics or are you using third party?

Are you marketing your solution or is this just for your own.