Market Maker Experience???

Discussion in 'Professional Trading' started by facultus, Oct 26, 2003.

  1. I was wondering if anyone who had experience working as a trader for a market maker would PM me so I might be able to ask a couple of newbie questions. I would appreciate it. And yes, I requested PM'ing because the questions are SUPER SECRET.
  2. Are you drunk or what? How come couple of newbie
    questions be a SUPER SECRET question?

    Ok, I used to know a market maker, Please send me the
    question and i will forward to the market maker.

    I promise not to share with ET
  3. I got a super secret question.

    What is a market?
  4. ah yes....secrets in trading! why not go to Yale and join the Skull and Bones!

    don't get me going!
  5. If you are serious, I was a nasdaq MM, so if your questions relate to that market, maybe can help you.

    I really cant imagine any questions that cant be shared with the group, so feel free to ask in this forum.
  6. matt5555


    Ask away...
  7. Question for the ex-mm's:

    What's the story with the occasionally extremely large print on the tape, usually under or above the market of an otc stock?

    Does it have any informational value for the proprietary trader?

    Tia, t4s
  8. Ebo


    Stay away unless you can read the tape.
    It can but not always signify "Blood in the water" to the sharks.
    It can but not always signal a long or short position on balance.
    You can certainly learn tons by watching the market's behavior subsequent to the print.

  9. ChrisRT


    Large prints to the tape are usually from the MM filling the client order and then transferring the shares. I described this very instance in my seminar last weekend and below is an example of how it works from a real time watch.

    In this case, the MM gets the order from the client or clients and they agree on price (although this is ARCA, you can use it with an MM), ARCA sat at 14.95 bid eating all selling. This was the MM or MMs buying. His client (maybe a fund) most likely wanted to buy 100000 shares or clients wanted to buy 75K and 25K. So he bought 100,000 at 14.95, and sold those shares to his clients at 14.96 and 15, making his profit in pennies x 100,000 shares for his trouble. When he sells the the shares to his client, he prints the blocks to the tape.

    His risk is that he agrees on price with client but RIMM goes over $15, in essence making him buy higher and sell lower and losing the commission for his trouble.

    This is a big difference because many people will be reading the tape and expecting that ARCA (whoever is using ARCA) is accumulating shares and won't let the stock drop. THis is false. He was simply at a price where he could buy 100,000 shares without competition and fill the whole order. If he dropped to 14.93 or 14.92, he might have had more competition and runs the risk of stock moving back to levels where he has no commissions without him getting the full 100,000 shares to transfer to clients.

    In this case, after he filled his 100,000 shares, he transferred the shares to his clients, he prints them to the tape and he drops off the bid and what you see next is lower prices because he wasn't accumulating shares, he was just finding an area where he didn't have to compete to buy the shares from open market sellers.

    I described this at 12:48. The blocks hit at 12:50 and he/they dropped off the bid and the stock went lower.

  10. good example above. 2 other possibilities also. The fist being the more frequent:

    1) A customer has a large order that they want "worked" for an average price.. The MM will ge the order and particpate at different levels, but b/c the order is larger it is affecting the market..

    ie: 300K to sell will gradually weigh the stock down and not let it bounce assumming no one is in the way. Once the MM has sold the 300K at X price, he prints it outside the market (b/c the average is higher than the current mkt, and tacks on a small profit to the price.. This usually means the seller "is cleaned up" and the stock will now bounce (retrace) considerably since there is no one holding it down anymore.. so once you see the print, buyers jump in to catch the retracement..

    This sounds good in theory, but when you have big buyes and sellers all working at once, it isnt that easy to catch with accuracy. And sometimes the customer will come back with multiple orders of 300K after it bounces slightly only, to screw over everyone who hopped in...

    2) A sales man accomodates a customer by buying a block away from teh market and gambles that they can unload without taking a large loss. ie. the MM buys 300K of INTC at 33. the market is 33.25-33.30. He hopes he can graudally unload it for a profit. if themarket tanks below 33, he is screwed and can get hurt. Very risky, especially since buyside customers are usually correct....
    #10     Oct 29, 2003