What techniques to market makers use to manage operational and 'massive' adverse selection risks?

Discussion in 'Automated Trading' started by cjbuckley4, Dec 7, 2015.

  1. Occam

    Occam

    Interactive Brokers Group, in addition to the brokerage, owns a counterparty entity -- it's called Timber Hill, and IB's so-called "smart" router can route there at its discretion. This is what is known as a "potential for conflict of interest". I have no idea whether IB routes to its own entity during an auto-liquidation (and in fact I would hope that they would go out of their way to NOT route to their own entity in such circumstances), but the routing to Timber Hill is something to consider if you're thinking about any strategy that depends on trading with customer flow from IB.
     
    #51     Dec 15, 2015
  2. IAS_LLC

    IAS_LLC

    Yup, that's what my plan is
     
    #52     Dec 15, 2015
  3. cjbuckley4

    cjbuckley4

    Is anyone here familiar with In Flight Mitigation? The CME documentation doesn't define when a "flight" begins, but (going back to my original question) if you're trying to get out of the way of order flow across multiple levels extremely quickly, this could perhaps be helpful. I don't think any of the retail platforms seem to support this, but I found some really really obsolete TT literature that mentioned it. Maybe this would be an approach to the "multi price level adverse selection risk" I discussed earlier? The documentation also doesn't specify if we're discussing full cancellations or modifications only.

    By the way, since some people "in the know" have posted on this thread...is there a more professional name for what I refer to as "CME documentation" than "documentation" or "EPICSANDBOX?"

    Thanks.
     
    #53     Dec 20, 2015