pseudo market making

We teach our new people how to make markets....the way they "want" to, not "have" to as most MM firms do. It's been good since the hybrid, we can make outside markets and get filled on the sweeps and simply sell or buy to close at current bid/offer. Not having to go long or short at every nickel really helps...you can wait for the basic move(s) that take place daily and "fade" when appropriate, reverse when appropriate.

Pretty basic concept, we even have traders with software to automate a good portion of it.

FWIW,

Don
 
Quote from cvds16:

It's more complicated than that, if you just wait for reversion to the mean you will get killed. You delta hedge.
pseudo market making only applies to options
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There was a prop trader from transmarket who mentioned that could be applied to indices futures but he wasn't clear on how it was done.
 
Quote from Don Bright:
We teach our new people how to make markets....the way they "want" to, not "have" to as most MM firms do. It's been good since the hybrid, we can make outside markets and get filled on the sweeps and simply sell or buy to close at current bid/offer. Not having to go long or short at every nickel really helps...you can wait for the basic move(s) that take place daily and "fade" when appropriate, reverse when appropriate.
Pretty basic concept, we even have traders with software to automate a good portion of it.
FWIW,
Don
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Care to elaborate a little more with an example. Thanks:)
 
Quote from virtualmoney:

Care to elaborate a little more with an example. Thanks:)
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Sure. 40.28 x 40.31 is the NBBO.

We are 40.24 x 40.35

When the NBBO moves, our bids/offers move as well.

Specialist performs a hybrid sweep down or up a nickel or so, we get filled even though the 40.28 x 40.31 doesn't change.

And today for example. I waited for GE to move more than 1 standard deviation (what we call "Bright Bands") based on historical volatility analysis, and started selling at 32.64, 32.68, bought back the .68's at .61, bought the .64's at .55, etc. This is a basic "pre planned fade" of the market move, not directional as it may appear. Could I have made more money, sure, but this is pretty safe, and remember 5,000 shares x .10cents per day = $100K per year.

Certainly not our most lucrative strategies, but good, working and simple and pretty safe way to make some money.

We do none of this blindly, we observe the pivot points, and the PREM/DISC to fair value for the "rubber band" effect.

I like to "take" liquidity on the NYSE, and then "park" my closing orders on ARCA to collect rebates.

FWIW,

Don
 
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