Is it possible to Make Markets as a little guy?

Discussion in 'Options' started by 76132, Jun 17, 2011.

  1. 76132


    Assuming you have enough money, is it possible to make markets and maybe become an exchange specialist for the CBOE if you don't have the fastest technology?

    I know fast computers really help out in taking advantage of arbitrage opportunities but can't you still make markets without top notch speed? I believe you can still be delta neutral and vega positive and not be hurt as long as there's no sudden change.

    I just want to make markets for one option chain (if I somehow get enough money that is...)
  2. rmorse

    rmorse Sponsor

    Making markets as a member of an exchange requires a broker dealer license, a trading permit and a clearance firm before you can be concerned about the best way to make markets.

    As "Professional Customer", you can make two sided markets on some exchanges using software from at least two companies we offer. The CBOE is one of those exchanges that allow customers to make two sided markets. So you can accomplish what you were asking about without the expense and requirements of membership. The software if co-located and runs on faster servers for lo-latency trading.

    PM me your contact information if you'd like to talk about it. These are segregated customer accounts with portfolio margin.
  3. 76132


    Thanks for the response. I am definitely interested in market making but don't have the funds to do so yet. I am just trying to figure out what I need besides money before I can do so.
  4. Rumblefish

    Rumblefish Guest

    Registered market makers get filled first.

    they get filled on bid and filled on ask priority over retail who pay the ask and sell the bid.

    I think you cannot put a bid and ask on option if you are not a market maker. what is the piont, you won't get filled on bid if you want to buy and cannot sell on ask.

    option market makers make money on the spread. similiar to book makers in Las Vegas.

    book makers don't lose most of the time. majority of the time book maker make money. or house advantage

    being able to buy at bid and sell at ask is an advantage

  5. rmorse

    rmorse Sponsor

    If you post bids and offers on the option exchanges, you either get a match with market makers or get priority over MM. Each exchange is different. I've spoken to options traders that trade 50,000 to 100,000 contract per day on the markets, as customer. As a retail customer, if your orders are send direct to the exchanges (DMA), that's what happens. If your order is sent to a "smart route", I'm not sure where it goes.
  6. If you're not automated you're going to get run over by fast markets all the time. This is just where the industry is at these days.

    Even being automated is not enough. Your infrastructure must be at least on par with the every other market maker or you'll get run over consistently. They pour a lot of money into their IT and hardware and you have to do the same or else you're just dead.

    Not sure what colocation is running these days but a couple years ago you were in the $20K range just for rack space.
  7. tomk96


    electronically? no

    in person, on the floor? maybe in a few few products.

    large groups with a lot of capital and infrastructure are the majority now day. and by a large margin.