g*****u
发帖数: 14294 | 1 Their are two key types of traders, market makers and prop traders. A market
maker is a sell side trader that deals with clients, they work at banks or
small brokerage houses. The other type of trader is a prop trader or a buy
side trader, which doesn't deal with clients and traders to make money and/
or manage his firm's risk. Buy side traders can be found in banks, hedge
funds, asset management firms,ect. A broker while technically not a trader
is a liquidity provider and is on the sell side. A buy side trader uses
brokers and sell side traders to make trades.
HFT are not market makers.
Yes market makers care about fundamental analysis and they do not only make
money from the spread. Where do you think these securities come from, the
trader's ass? Every market maker has a book (aka inventory) that they manage
and is essential for providing liquidity. Market makers make money off the
positioning of their book. A trader doesn't buy a security and immediately
sell it. First, that is no one to make money and second there is not enough
liquidity in most markets for that to happen in bulk--the buck has to stop
somewhere and someone needs to take on the exposure/risk.
In terms of making money off of the spread, there are two instances where
this happens. One is the trader is talking with one client over BB who wants
to sell and another client over BB who wants to buy. He will work the one
who wants to sell to a lower price and the one who wants to buy to a higher
price. Eventually he will close both, buy the securities and immediately
sell them to the other client and probably make a nice 3 or 4 ticks for
himself (we are talking bonds and OTC products not exchange traded equities,
just in case you didn't know).
The other way a market maker makes money (this is a fixed income/debt
example) is when the client wants some bonds that are on someone's BWIC (
bids wanted in competition). The client will either tell the market maker
what to bid or he will ask the market maker to bid for him. If the market
maker wins the bonds, he will give them to the client for 1/2 a tick to 1
tick more than he paid for them.
Back to book positioning, the trader has a book of securities and he needs
to decide which securities he wants, which he doesn't, and how best to hedge
the book. While it is not "prop", every trader deals with a "prop"
component. Maybe he thinks that TM is under priced and will see some strong
client demand, the trader will buy lots of TM shares. Is it to provide
liquidity, yes, but a market maker manages his inventory with his own view
of the market and is taking a "prop" position. I know of one bank back
during the Summer that thought the Euro crisis was overblown and started
buying lots of calls and Euro/Dollar in the FX market. Did they make a shit
load of money when the Euro rallied--yes, but they were also able to provide
the best liquidity/prices to clients who wanted to get long/cover their
shorts because they had the Euros and options to sell.
A trader may also be given a position from his market making activities that
he doesn't like-lots of client selling it, he doesn't like it himself, but
there aren't any buyers so he is stuck with it. If he doesn't like it, he
can go into the derivatives market and hedge out the risk while still
keeping the securities in his inventory.
Also, every trader has general "book hedge" If you trade credit, you have
CDX index shorts (along with SN CDS). The size of those shorts changes based
on the size of your book and where you think spreads are going. If you are
bullish on credit spreads you will remove some of the CDX short. If you are
an equities trader, you will have a general S&P short which will change.
Market making isn't about making money off of the spread, it is about
providing liquidity to the market by constantly giving bids and offers and
being a main point where buyers and sellers go to exchange. A market maker
makes money from the general market movements and his exposure to those
moves. | a*****e
发帖数: 1717 | 2 this one is not good, a lot of conceptual errors.
hft could be electronic market marking type and there are a lot.
it's weird to divide trading by market making and prop trading.
and market making has nothing to do with sell or buy side.
But it's very good to bring this up, majority ppl here has a wrong
understanding on market maker, very very wrong.
market
banks
or
buy
and/
hedge
trader
uses
make
【在 g*****u 的大作中提到】
: Their are two key types of traders, market makers and prop traders. A market
: maker is a sell side trader that deals with clients, they work at banks or
: small brokerage houses. The other type of trader is a prop trader or a buy
: side trader, which doesn't deal with clients and traders to make money and/
: or manage his firm's risk. Buy side traders can be found in banks, hedge
: funds, asset management firms,ect. A broker while technically not a trader
: is a liquidity provider and is on the sell side. A buy side trader uses
: brokers and sell side traders to make trades.
: HFT are not market makers.
: Yes market makers care about fundamental analysis and they do not only make
| g*****u
发帖数: 14294 | 3 Please feel freed to add.
【在 a*****e 的大作中提到】
: this one is not good, a lot of conceptual errors.
: hft could be electronic market marking type and there are a lot.
: it's weird to divide trading by market making and prop trading.
: and market making has nothing to do with sell or buy side.
: But it's very good to bring this up, majority ppl here has a wrong
: understanding on market maker, very very wrong.
:
: market
: banks
: or
| a*****e
发帖数: 1717 | 4 嗯。有空我找片更准确的:D 这个话题的确很好。
【在 g*****u 的大作中提到】
: Please feel freed to add.
| g*****u
发帖数: 14294 | 5 I had an wild guess.
RENN is on NYSE. Wouldn't the specialist smelled blood and naked shorted the
damn thing? hehe
【在 a*****e 的大作中提到】
: 嗯。有空我找片更准确的:D 这个话题的确很好。
| r*****s
发帖数: 63 | 6 expecting............
【在 a*****e 的大作中提到】
: 嗯。有空我找片更准确的:D 这个话题的确很好。
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