What's Market Makers' Advantage?

What
Robert Morse said:
No, not even close. My comments were for US Listed option market makers that are members of an option exchange and have quoting and regulatory requirements.


Bob
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What are the costs these days for a seat/registration? Does the 60/40 tax treatment still apply if these guys take punts on underlyings that aren’t hedges?
 
jtrader33 said:
What


What are the costs these days for a seat/registration? Does the 60/40 tax treatment still apply if these guys take punts on underlyings that aren’t hedges?
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The clearing broker I mentioned require $10mm or more to get clearing.
Accounting/regulatory can run for a single member $1000 to $1500/month
Actant Quote is about $3500/month plus non-display market data which could run $12K/month plus hosting.

Exchange trading permits are the least of your problems.
 
Robert Morse said:
I'll give you an example. You have no position and want to enter one order on both sides of the market. You enter:
Buy 10 at 1.00 (Your broker sends buy to open (BTO))
Sell 10 at 1.05 (Your broker send sell to open (STO)

First, you can't do this on the same exchange as priority customer. Exchanges do not allow this. You can do it as Professional Customer which has costs. Any customer that actively wants to make markets as customer will have to claim the Pro-Cust status for other reasons.
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I’m glad I can set both bid & ask at the same time on options, but recently can’t get fills like I used to and trying to figure out what’s changed.
So my last question is whether options on some/any underlyings are covered by multiple mm’s and whether it is (or was) possible that different mm’s would fill different legs of an order (even by accident)?
 
guru said:
whether it is (or was) possible that different mm’s would fill different legs of an order (even by accident)?
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Not sure what you are asking. If you have different legs of an order, that implies a spread. Spreads are entered as one order and you get one trader on the other side of both legs. There is no legging at the exchange level. You either submit a single leg or a spread, The Spread goes to to the COB.

And yes, most options are covered by more than one MM on more than one exchange.
 
Robert Morse said:
Not sure what you are asking. If you have different legs of an order, that implies a spread. Spreads are entered as one order and you get one trader on the other side of both legs. There is no legging at the exchange level. You either submit a single leg or a spread, The Spread goes to to the COB.

And yes, most options are covered by more than one MM on more than one exchange.
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Is this true if you hit the ask on the spread but on separate excahnges? (i.e. order for vertical, long leg 1.05x1.10 on CBOE, short leg .05x.10 on BATS; each is NBBO but only on that exchange...order to buy at 1.05). Will the broker fill this across two exchanges, or will they list it in the COB to be arb'd off? And does this vary by broker?

guru said:
I’m glad I can set both bid & ask at the same time on options, but recently can’t get fills like I used to and trying to figure out what’s changed.
So my last question is whether options on some/any underlyings are covered by multiple mm’s and whether it is (or was) possible that different mm’s would fill different legs of an order (even by accident)?
More...
Yes, individual MMs will list on different exchanges on the same underlying (some at least--though I think most have a preferred exchange), and different MMs will compete on the same exchange with each other. Even the least liquid names will have multiple market makers covering them. And no, if your order goes to COB it will have a single counter party (though, I await clarity on the scenario above).
 
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