Question about Market Making

[96pills]

Just a quick question: when you have a market maker, is it usually a person working for a firm, or a person working for themselves like a sort of prop trader but market making.
(sorry if i phrased my question badly but you get the point)........

 

[foredog]

Market makers are companies, in the smaller companies you'll see them listed on level2

 

[96pills]

so you cannot have an individual guy called a market maker working for himself on his own book???

 

[rawrschach]

technically you can

 

[nile_croc]

Just a quick question: when you have a market maker, is it usually a person working for a firm, or a person working for themselves like a sort of prop trader but market making.
(sorry if i phrased my question badly but you get the point)........

Market makers always work for firms. I was one myself, (NASDAQ) and there are no market makers that are self-employed, unless they own the company!

As far as being like prop traders: sometimes market makers take positions, sometimes they don't, it all depends on your order flow and market conditions. Most of the time, I did not take positions, unless it was forced on me.

 

[gooseman]

most exchnages run a DMM scheme (dedicated market maker) where the registered MM is obliged to show a 2-way price at all times and oyu get certain incentives from whatever exchange. rebates etc.

 

[Skill Leverage]

It would seem that there is two definitions of 'market maker' - you've got the literal meaning described by goose etc., but other people use it to refer to prop traders who are permanently in a position, usually taking the other side of the current trend and varying the depth of their 'book' accordingly. I know a couple such guys who refer to themselves as market makers, even though technically they're not; I guess most of the time they are performing the same function.

 

[Directional]

if you're working bids and offers, for example in the STIRS, I'd consider that to be making a market. LIFFE recognise it by provide "liquidity provider rebates", although that is seperate and distinct from the DMM programme.

 

[GammaJammer]

Even in interbank spot FX that's true. EBS and Reuters charge for 'aggressor' (i.e. price taking) hits, but usually let you trade bro free for 'non agressor' (i.e. price making) ones. But when you call someone a Market Maker (note caps) it usually means someone for whom that activity is their raison d'etre.

 

[96pills]

thanks for the insight guys