Sigourney Anon response

[Anonymous No.12502650]

>>12501102

Previous thread was archived before I could respond.

I needed to respond because this know-it-all is actually a pretentious retard.

>This is 0% true of anything having to do with market making. A designated sponsor does not make money by estimating or calculating the true values of assets and then aiming to buy lower and sell higher. This is not market making.

https://www.wallstreetoasis.com/forums/interview-question-make-a-market-on

Wrong. While it's not the sole focus of Market Making. Theoretical Values are something of consideration. How they come up with them is likely proprietary. And it's not value in the sense of like of DCF model.

>You are confusing statistical arbitrage (aka latency arbitrage) with market making. HTF's being feed the order flow's by the prime brokers or ECN/MTF's and thereby doing predatory and legal front running of the big buy-side don't do market making in this sense: It's called latency arbitrage and a negative effect on the bid-offer-spread. Thereby it is by definition negative in the market making sense.

'Latency' is not just a term used only for front-running. HFT is, itself, low latency (or plays a big part). Latency arbitrage has nothing to do with statistical arbitrage, that goes into shit like correlation/co-integration.

https://www.elitetrader.com/et/threads/hft-myths.266552/page-42

When asked about how that trader scratched their trades:
>Do you typically take liquidity to scratch trades and do you think this is a mean thing to do to all the manual traders out there?

He responded:
>3) Many times I do take liquidity to scratch trades. No, I don't feel bad for manual traders. If you're not efficient enough to be resting orders to make the bid/ask spread then you should expect to get picked off (I certainly do often).

That's what I was trying to explain, when I mentioned how they contend for Queue position.

[Anonymous No.12503403]

>>12502650

I am drunk...but I am here. Let me get my shit together....a moment plz.

[Anonymous No.12503441]

[Anonymous No.12503462]

>>12502650

I will try to respond to everything you were mentioning. But please bare with me: I have a 1 ltr. Glenfarclas 12 yrs. in my system.

>How do I set the spread size?

This is out of the wallstreetoasis thread...and it is the most intersting thing to come up with in this context. The true insight of understanding market making is indeed this: Setting the spread. A very good mate of mine on the FX desk of a German big bank explained it to me. "If you want to have a nice lunch...then widen your spread", Markus told me. This is actually what you are able to do as a market maker. The market maker really is not interested in the true npv of an asset. He is just "making a market" for this asset by offering prices for buy/sell offers. This is his mandate - what he signed up for by being a designated sponsor in this very asset.

[Anonymous No.12503509]

>>12502650

Adding to your first question:

DCF is not of a consideration for market making in the common sense (i.e. algorithmically): Neither would there be the need for estimating the net present value of a given asset nor would there be the time. If however, volatility is going through the roof, spreads will be set 'accordingly'; and this is to be understood in the right set of mind: Spreads - for a market maker - are there to protect your bankroll, too. If things are getting unrealistic, widen your spreads and you will find no one giving in to your offer/bid. So there would be no trade. Therefore there would be no risk on your side. This is the very tool to protect you and your capital in uneasy markets.

[Anonymous No.12503594]

>>12502650

About your 2nd question:

>'Latency' is not just a term used only for front-running. HFT is, itself, low latency (or plays a big part). Latency arbitrage has nothing to do with statistical arbitrage, that goes into shit like correlation/co-integration.

Do not confuse HFT with algorithmic trading. 'Latency' plainly refers to measurement of information response time. There are HFT-strategies not so much dependent on latency than others. The most latency dependent strategy is indeed 'latency arbitrage'. 'Latency arbitrage' is not identical to front running, but the sole purpose of 'latency arbitrage' is front running. As an HFT following this strategy you are interested in having access to order flow data of an exchange/ECN/MTF in a way so that you are able to physically front-run your enemies (=every counterparty qualifiying the property of making orders hughe enough to be of interest for you). Physically you do achieve this, among other things, by establishing co-location. This is true. See also: https://www.investopedia.com/articles/active-trading/042414/youd-better-know-your-highfrequency-trading-terminology.asp Here the terms 'latency arbitrage' and 'front running' can - in some cases - be used interchangeably. The article is in parts of questionable value.

[Anonymous No.12503684]

Now this here

>When asked about how that trader scratched their trades:
>Do you typically take liquidity to scratch trades and do you think this is a mean thing to do to all the manual traders out there?
>He responded:
>3) Many times I do take liquidity to scratch trades. No, I don't feel bad for manual traders. If you're not efficient enough to be resting orders to make the bid/ask >spread then you should expect to get picked off (I certainly do often).
>That's what I was trying to explain, when I mentioned how they contend for Queue position.

is tricky, because I am not sure as to what you're up to. I don't know...I'd really like to get into this with you, because you seem to really like the topic. How should we do this? Drop me a mail at ---> [e-mail]?

[Anonymous No.12503725]

More, please!

[Anonymous No.12503774]

>>12503725

I don't know, at this point, I am lost and usually post my pdf's hoping to be of any help for interested anon in any way.
>>12503725

[Anonymous No.12504133]

bump

[Anonymous No.12504238]

bump

[Anonymous No.12504269]

I wish I wasn't a brain let and could understand all of this.