Hi all, Could anybody give me some pointers to readings on market making and electronic market marking? Hopefully I could find in-depth readings on this topic. Thanks a lot!
You have no idea what you are doing and you want to be a market maker? Market making is a very crowded space and as Yogi Berra said: "Nobody goes there anymore; it's too crowded." Why don't you read everything you can find about Timber Hill, LLC and then ask yourself if you really want to compete against them.
In all fairness he seems like he is trying to learn and does seem genuine. Would you rather have someone ask fairly intelligent and straight forward questions in an attempt to learn or would you rather someone troll ET offering opinions about things they know nothing about. This subject, along with many other topics that OP posts about, is something that very few people on ET know about or even understand. The issue is that there arenât any âmarket making for dummiesâ books out there and those that to know/understand the game arenât going to offer up their experiences without getting something in return.
Yes and no, I for one enjoys just intellectual conversations, without anything in return. And I will agree that the OP is definitely trying to be upfront and direct about his questions. The trouble that make a conversation like this difficult is that while the OP is definitely sincere, he is asking some fairly complex and big issues (AMM, VWAP tuning, execution strategies, etc), that a lot of ppl spend a few years just to grasp the "basics" right. To make a strange comparison, let's say instead of AMM, we are talking about ... making meatballs. "oh yes, you brown it in canola oil, and measure the meat temperature ..." Problem is the follow up question, "what is canola oil? is that some kind of special oil?", "how do you evaluate meat temperature? do you poke your finger into it?". My apologies, but I rather have a conversation with a fellow cook who at least know the basics, rather than having to explain "canola oil" or something like that.
^^ Excellent post. This problem occurs a lot. Someone who has expertise in something will attempt to help by offering some info; but then when that info isn't understood and the expert doesn't feel like / have time to explain everything, the original info is dismissed as insincere, incomplete, false, etc.
I've said time & time again that the barrier to entry into anything automated is so high (machines, lines, tick/backtest data, etc.) that no single person can learn it and go it alone. I agree that its easier to talk to people who are at same/similar level. I work with folks looking to build out ATS and more often than not its the little things that have been keeping their strategies from being profitable. That said, they don't have MM or liquidity providing or HFT strategies, just simple trades that can be boxed. I think most people would agree that trying to get into the AMM/HFT space today is a complete waste of time unless you have the resources already.
Oh you know I will disagree with that. It is not *that* hard to start an AMM/HFT operation from scratch. Having done exactly that, i know it is a fairly reachable goal (yes, I started as a single person). While I have had some prior knowledge alrdy on the brokerage side, and the transition is bumpier than I thought going into it, but the overall cycle was shorter than what I originally imagined. And since I know a fair number of AMM/HFT/Automated Trading operations, the actual landscape is more primitive than what most ppl think. One of the major reason is "legacy", a lot of firms (including the large firms), have trouble "fixing what ain't broke", so they stay on the 4-5 year old platforms (hardware, handlers, even calculation engines). So in some ways, an up-start AMM/HFT firm actually may have an advantage in not being burdened down with all that "legacy" stuff, and can experiment / explore the bleeding edge. The main challenge I think facing AMM/HFT is just capacity of the markets. To take a firm I know as an example, a well known firm, they were almost "minting money" in 2008 (few million a week), and their performance fell > 50% in 2009, and even further in 2010 (fine, still profitable). This space has become seriously over-crowded, everyone is looking for "guaranteed alpha" has at least looked at HFT.