Market Making

[Metalloyd]

Hi

Can anyone tell me where I can find information/books/sources on market making?

All the websites I have been on have only basic info about it. 🙁

 

[nile_croc]

I worked as a MM years ago on NASDAQ/OTC. I'm not aware of any publications/books on the subject. To be honest, there's not much regarding MM to write a book on other than "war stories."

 

[Metalloyd]

Well thanks for the replay Nile_croc. But there has to be some source where I can refer to for information. Places where I can find Market making puzzles etc. You know practical market making stuff...

 

[virtuos0]

which market are you in interested in?

 

[tommog]

most market making is done by computers now. To get market making status from an exchange you generally need to agree to provide a 2 way quote in the market at all times and in return you get ultra low commissions.
I suspect however that you mean short term discretionary trading trying to scalp or pick up a few ticks consistently. Again trading commissions are your biggest enemy you need to be in a proprietary trading house to stand half a chance on that front.
As for specific trading techniques there are no holy grails that all market makers know about. We are all in the game trying to eek out a living, some more successfully than others. But i would suggest looking at spread trading (NOT to be confused with spread betting) as an avenue as true market makers rarely hold a naked or unhedged positions for long.

 

[GammaJammer]

Yep people do tend to assume that there's some magic book out there that teaches you how to do a job. Almost all the things I know about my job that really matter (and I am an FX market maker fwiw) have been learned on the job. Over many years.

Happy to answer specific questions where I can btw, and also there's something in the works that will most likely be in the T2W knowledge lab that might help (watch this space).

GJ

 

[Metalloyd]

hmm...you guys make some interesting points. I would like to know more about proprietary house trading. How do they conduct their business? What would a typical Market Maker's day be like? When do they start? When do they finish? What specifically do they look for when making a trade? What would be an ideal speard for them? etc..

I would greatly appreciate your inputs ..

PS I would like to thank Nile Croc for sharin his valuable experiences on wholesale trading. 🙂 :clap:

 

[foredog]

hmm...you guys make some interesting points. I would like to know more about proprietary house trading. How do they conduct their business? What would a typical Market Maker's day be like? Long and busy

When do they start? Hour before market opens

When do they finish? A little after the market closes

What specifically do they look for when making a trade? Profit or a quick cut

What would be an ideal speard for them? etc.. 1-101....depends on the instrument but the bigger the better.....if they are 98-99 and somoen tries to get inside you're losing a big % pf the turn, if they are 97 -102 you can sell them at 101.75 and still make a decent turn.


I would greatly appreciate your inputs ..

PS I would like to thank Nile Croc for sharin his valuable experiences on wholesale trading. 🙂 :clap:

These aren't text book questions as no two trades and markets are the same, it's not like working somewhere and being told if you press X it will make Y, a lot of it is discretion. Sometimes you'll buy something you don't want at a silly price to help a mate out or keep a BIG client happy, that won't be in any book.

My advice would be to look a bit deeper into what you actually want to do first, then ask some more specific questions and maybe we can help.

 

[nile_croc]

Sometimes you'll buy something you don't want at a silly price to help a mate out or keep a BIG client happy, that won't be in any book.

Ha! I couldn't have said it any better! This is the dimension of market making that 99.9% of traders know nothing about. Making markets is all about servicing customers and making deals. You'd swear most buy-side and retail traders think that the function of market makers is screwing people out of trades, manipulating markets, speculating with other people's money, and arbitraging customer orders. Market making involves all kinds of risk, and believe me, you can and DO lose money, VERY FREQUENTLY. Just because you have the ability to SOMETIMES buy at the bid and sell at the offer does not guarantee a profit. Making markets is a business just like anything else: you have customers, product, inventory, etc. It's all about keeping the customers happy, executing orders timely and efficiently, playing within the rules, making deals, and hopefully make a profit in the process.

 

[GammaJammer]

This might be of interest (I can't be arsed to type it all out again)...

GJ

http://www.trade2win.com/boards/gen...90-hedging-client-positions-8.html#post867824