ReggieCommaRose

You may not directly participate in capital markets but institutions around you that society relies on do. They do so to secure operating cash, loans, buy or sell insurance, etc. When people participate in capital markets they do so looking to make a profit or to purchase some utility, ideally these people have done some research about their trade before firing. Market makers compete for the right to charge you a fee (the spread) to make that transaction. You’re paying a fee to sell them risk (the risk that you’re correct with your opinion). Collectively this adds up to information exchange between all parties becoming less expensive: more participants on either side of any trade, smaller spreads, etc. Less friction. Options MMs are more or less directly buying and selling insurance.

Devil in the details. MMing is conceptually simplistic but the operational costs are huge and are generally getting worse. Making while fighting these costs against competition playing the same game as you turns non trivial real quick.

That said MMs have mostly consolidated heavily over the last decade (due to many firms collapsing against competitors) so in some ways the business has been commoditized. Not sure if true of MMing ETFs as an authorized participant (JS bread and butter) though, idk much about the logistics there.

Collectively they reduce friction and increase transparency for global information exchange. Obviously no one does it for purely altruistic reasons but the byproduct is (probably) net positive.

Usually too smart, on rare occasion they cheat. MMs inherently deal with information assymetry and adverse selection because they generally stand ready providing liquidity with quotes out in the world (though obviously width matters). Toxic counterparties are parties who decide to trade against you who have a better idea about “true” price than you. They might make or they might not, depends if the degree in which they’re right overcomes the spread they crossed. Other MMs can be (and often are) toxic.

The topic at hand is mainstream adoption and I think empirically the world disagrees with you.

I’m not sure about delta one firms but almost all the options MM firms have been having record years in the COVID / meme stock era.

In broad strokes, the things that hurt market makers the most are long winded price trends and accumulation of inventory. So generally MMs can and often will eat large initial losses (depending on how many wings they happened to have owned at the time) when huge volatility spikes happen but when the raised volatility stays at that level for some amount of time (you’ll sometimes hear this referred as market “regimes”) and the MM was able to not blow out from the initial spike they’ll more than make up their losses from the good trading environment after the fact.

Market makers as a whole were suffering during the mid 2010s when volatility was low year to year, correlation with SPY was high, and all the indices basically just went straight up every month.

I work in a vanilla MM space and have had limited exposure to systems/technical side in the crypto space, would love to see the weird/cute crypto-specific problems that exist.

For instance I was surprised to learn the other day that FPGAs are becoming standardized in the crypto space now as well, since to my knowledge network bottlenecks are more difficult to be precise about due to the common usage of websockets, the non-standardized colocation services offered, etc. But what crypto MMs are using FPGAs for, is to do actual JSON (maybe it's FIX by now?) parsing since that became a common bottleneck due to the lack of binary protocols from crypto exchanges.

Damn the formatting/design of your site is fantastic.

It's probably strictly worse than other exchanges if we're considering what the point of an exchange actually is. I've tried optimistically viewing LTSE from multiple angles but an exchange just seems like the fundamentally incorrect business model for their supposed goals.

That was my point - that Google isn’t ACTUALLY well diversified compared to its contemporaries.

Google is well diversified in its business endeavors but hasn't been capitalize on that for a better diversified revenue stream.

Parent is using inflation of fiat as an argument for crypto which doesn't apply to Dogecoin. It doesn't matter to me if the mascot for a coin is a literal butthole.

...but it's Dogecoin.

The state lottery specifically? Maybe? Though it could just be a case of the state lotteries not being targeted at the better off and better educated demographic. The lottery is also just so transparent. But I see very smart people gamble in games they don't understand well all the time. It's just fun sometimes.

The writer played a lottery, just a different kind.

I imagine a big part of lottery winners going bankrupt are due to lack of education and/or comfort in having that much money at once (after all, the vast vast vast majority of lottery players are lower middle class to poor). It sounds like the writer (somewhat ironically) came from money so she'll probably be aight.

I think if we have to make a distinction, then categorizing games of chance where you're wagering money or direct money equivalent seems like a fair one. And in that sense, I wouldn't consider every trip I make to a hole in the wall eatery gambling.

I used to play full-time and I currently work in trading.

Poker is definitely gambling. Casinos are gambling, they’re just doing so with massive volume and tiny risk (afaik). Trading is gambling. Gambling well is a subset of gambling.

Trading facilitates more efficient allocation of resources at both a geographical and temporal scale. HFT market makers facilitate more efficient trading. If anyone tried pitching automated trading to you as some form of altruistic endeavor then obviously that’s bullshit. These people are out here to make a buck. Those milliseconds to nanoseconds moves are just competition between MMs happening in realtime. Is it done for the sake of a better world? No. But it just so happens to benefit society as a byproduct (on average) in the form of tighter spreads and liquidity. It’s up to you to decide if that’s good enough for you.

If we’re going to paint anyone as “real” villains in the world of trading then I’d argue it’s the informed big block traders. ie hedge funds, banks trading exotics with a high barrier of entry, etc. At least MMs are largely market neutral.

Is the head of stat arb now? I thought he was messing around with sports betting in Dublin or something.

Anyhow having played/discussed cards with quite a few trading and research people from SIG I can safely say the poker thing there is more marketing fluff than anything else. Pretty effective marketing though it seems. Which is fine of course, because trading is a completely different game.

No one (prop/hedge funds) really does that anymore. Hiring poker players directly that is. Outside of really niche small firms with really specific cultures. It kinda almost happened with SIG and Jeans89 but Jeans already had a relevant degree on top of being a top 0.00001% player.

The direct analogies between poker and market making are already way thinner than many people make it out to be though they still exist. But I’d argue poker experience is basically completely useless for quant investing.

As a former professional player whose last two employers use poker as a marketing tool for hiring, I strongly agree. If you want to be good at a game, learn that game specifically.