SIG and Wolverine are big equity option players. Not sure about the rest. Infinium and DRW are more futures, right? I've heard of Optiver but only in passing. That's actually an interesting question - who are the biggest equity option market makers by market share? I'm guessing GS, Citadel, SIG are the top 3. Anyone happen to know for sure?
Well, I understand that one of the tricks the HFT boys use is to spot a price change in the underlying and immediately buy calls or puts (withing a ms or two) before the MMs have a chance to update their quotes. I'm still trying to figure out the social benefits of this. Needless to say, if you're not coding a colocated HFT system you can forget about this sort of arbitrage.
Of "social" benefits I am not qualified to respond - perhaps you could check with all the various market participants to see if they felt like their self-confidence was affirmed or something. However, I would think that the "economic" benefits of an orderly, highly liquid option market in which the accuracy of volatility pricing is rigorously enforced by immediate rewards and punishment is something that would be painfully obvious, even to the blithering idiots among us.
Well for the vast majority of ordinary options traders, individual or institutional, it makes no difference if the MM are 5 ms tardy in getting their quotes updated. So I am unconvinced that the gaming by the HFT improves liquidity or accuracy in the option markets.
Look up the exchange messaging limits for market makers, it's usually available somewhere on their web page. This will give you an idea of the amount of orders you can place in a given time period. With that information you should be able to figure out how frequently prices are updated.
Yep, I can think of a dozen very well capitalized Chicago firms with very robust ECNs and execution platforms that have been doing this for many years. In fact, one of my clients is the Risk Manager at one of the largest. The margins have been chiseled down to nil, and it actually is not really close to being as good as it once was - Ronin sold that business to Toronto Dominion Bank about a dozen years ago when the value was probably at it's peak.
I enjoyed the posts from Jerkstore and others. I have to say that this game is also about queue prioity not just speed. Market makers have position limits or their orders occasionaly get pulled for some other reason. If you know your market and you're sure in your theo values then you will get your market share. Don't be let down by comments like atticus's. In the end it's all about revenue minus costs. Big MMs pay heaps for memberships/data/software, they have to comply with quoting rules, minimum spreads, etc. I believe a small MM with no obligations can have their share. Depends on the market of course, I know little about US market. As to the time for repainting the option chain it can take only 100-200 microseconds of processing time for the best MMs. But the time to update the quotes on exchange can take up to a second as noted before, due to network/exchange latency and capacity limits. What's your situation? Are you an individual trader or a part of some company?