MarketMaker techniques

Discussion in 'Order Execution' started by StillStanding, Dec 10, 2009.

  1. Hi

    How do big firm market makers handle trend risk?

    If always maintining bid/ask spread , then a rapid trend move could result in them averaging down all day against the trend ending up with enormous losses at end of day.

    How do they avoid this?

    Do they carry over the loss?

    Do they stop averaging down at some point?

    Do they bail out at some point? if so when?

    Do they keep moving the average down point further away as their losing position grows?

    Any former professional market makers working for a big firm on this forum ?

  2. I never knew "market makers" in today's market took positions!

    NYSE specialists don't "maintain" an orderly market, and NASDAQ MM'ers certainly don't these days, well they run ahead of the customer, if you call that market making!

    The good old days of flipping CSCO for 1/2 points are long over.

    I think I saw a picture of a NYSE specialist taking a position in the Luncheon Club!

    Which market are you referring to?
  3. any market e.g. forex. The question also refers to how it was done historically even if not being done much anymore.
  4. I'll post a few war stories from the 90's after I have dinner & several cocktails...worked on the NYSE and then upstairs.

    Put it this way, NASDAQ marketmakers had a license to print money when stocks traded in fractions.

    I know nada about Fx bucketshop mm'ing.
  5. we'll take whatever you have....
  6. Illum


    Can you speak of gaps when you get the time. Is this how they make back the money when he asked about -carry over loss-

    Interested to know, thx for your time. Some gaps are interesting to me. No volume put them there, and they don't seem to hold much of the time. Seems like a nifty occurrence for someone. maybe its nothing, I have no idea. Also, I feel no hate for the mm, would like to know more. Taking orders at the open, then bringing the market back to even the book, stuff like that.
  7. As far as I'm aware they are delta hedged and long gamma most of the time.
  8. Whatever they do, it's meant to be as obscure as possible. If you knew what they were doing you could profit from it.

    They prefer it the other way around.
  9. WinSum


    They control the Open. They would Gap it Down if net short or Gap it Up if net long. Forcing Margin Calls and/or hitting Stop Losses allows them to square up their position.

  10. Moving it around enough to cause margin calls is a load of BS, go back to zerohedge
    #10     Dec 24, 2009