Zillow lost money because they weren't willing to lose money

Re:Zillow lost money because they weren't willing to lose money by wpietri on Saturday November 27, 2021 @03:36PM (#29363140)

That could be it. Except that if market-makers were ideal in that sense, they wouldn't need to exist. If a buyer and a seller simultaneously exist at a given price, they can just trade with one another. Market-makers are valuable to markets only when they provide liquidity through non-simultaneous buy/sell pairs.

I think it also leaves out that not every market maker wants to be flat instantly. The one I worked for, and at least some of our peers were sometimes happy to hold inventory for a bit when they thought the market would even out.

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Re:Zillow lost money because they weren't willing to lose money by JumpCrisscross on Saturday November 27, 2021 @07:54PM (#29365179)

> one I worked for, and at least some of our peers were sometimes happy to hold inventory for a bit

May I ask if this was before or after GLB (1999, for the kids following at home)? (My experience as a derivative market maker was post GLB and post crisis.)

Managing a flat book is less exciting than placing directional bets. It’s also less profitable, at least when the bets go well. Add to that the complexity of market making, particularly when derivatives enter the equation, and you get the two decades–following the advent of ECNs, turbocharged by GLB and ending in the financial crisis—in which market making desks were proprietary traders first and liquidity providers second.

Also, if you buy a swap and I simultaneously sell stock, there is both a simultaneous trade and liquidity being provisioned in a value-adding way.

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