What's a good way to start learning how market-making works?

Discussion in 'Trading' started by Kovacs, Oct 2, 2010.

  1. Kovacs


    What does it take to become a successful market-maker? What kind of skills and knowledge does one need? I'm specifically looking at equity market-making with no options.
  2. Redneck


    Think of market maker as the hub of a wheel

    One side of the wheel is buyers....., the other side sellers

    Wheel becomes unbalanced – MM brings it back into balance


    What you need to be one – lot of money..., and the ability to carry inventory (stock either long or short) for a period of time

    Although the goal is to end each day net neutral

    No clue how to actually become one

  3. Kovacs


    Are MMs mean-reversion traders by nature?
  4. Seek to be employed by investment banks?

    Doesn't a market maker require some Series-X exam qualifications?

    As an individual, we can play market maker to buy on bid and sell on ask. But we wouldn't have access to level-3 and order flows.
  5. Redneck


    Technically they are not traders at all – simply there to ensure equilibrium between buyers and sellers exists at all times…

    Having said that…..

    They see both sides of the market…. They cut deals with big players…. And, as we all know, they do trade their own accounts (rather their firm's account)

    Great work if you can get it

  6. rosy2


    get in a time machine because a computer does it now
  7. Kovacs


    Someone programmed that computer.
  8. Kovacs


    Side question: How much continuous probability is there in quantitative trading (or is it mostly discrete)?

    And will learning time series analysis benefit?
  9. PM me for Empirical Market Microstructure....
    #10     Oct 2, 2010