81–90 of 120 posts
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The only reason GS is still around is because they did what they did. They protected their shareholders the fine is trivial (less than 10%) compared to the losses they would have taken if they followed the course of action that everyone else did.
A $13b bailout on suspiciously favorable terms had something to do with it, also.
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If you prevent banks from doing the riskier forms of market making, then that responsibility will move to firms that don't have access to customer deposits. Because their capital base is less stable, they will be more prone to stop making markets precisely when you need them most. That will probably make extreme volatility events like flash crashes much more likely. This is already happening today to some extent: [1]…
Volatility can be highly valuable in the long term to keep markets honest. Without that there is a tendency to add leverage until something far more significant breaks down.
Suggested alternative: "How One Goldman Sachs Trader Made His Firm More Than $100m"
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Or, do what's fair and pay up if you like the articles..
Is their $12/12 weeks method ~really~ that effective for news aggregation websites such as HN or Reddit? Unless you've been a subscriber to the physical subscription, and enjoy it I see no reason why someone from one of these sites would subscribe.
The problem is that's a teaser rate. The current rate for 1 year is $277. That's way more than I'm willing to pay for a single newspaper.
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Market making you provide a buy and a sell price and keep the spread for your "service". Prop trading: you buy or sell based on a guess which way things will go and hold that position then exit at (you hope) a profit. Normally the big book of banking says market makers "provide liquidity" which in my experience is enough to make most people in banking stop right there as providing liquidity is to them akin to passing…
Thanks, question: "as providing liquidity is to them akin to passing bread to orphans." I'm not following your meaning there. Meaning? Also, is every brokerage also a market maker?
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Market making you provide a buy and a sell price and keep the spread for your "service". Prop trading: you buy or sell based on a guess which way things will go and hold that position then exit at (you hope) a profit. Normally the big book of banking says market makers "provide liquidity" which in my experience is enough to make most people in banking stop right there as providing liquidity is to them akin to passing…
Also, prop traders use the firms money to trade, they don't use client money. So the firm is responsible for the loss and gets the benefit of the profit.
Earlier quoted context omitted.
Market making you provide a buy and a sell price and keep the spread for your "service". Prop trading: you buy or sell based on a guess which way things will go and hold that position then exit at (you hope) a profit. Normally the big book of banking says market makers "provide liquidity" which in my experience is enough to make most people in banking stop right there as providing liquidity is to them akin to passing…
Thanks, question: "as providing liquidity is to them akin to passing bread to orphans." I'm not following your meaning there. Meaning? Also, is every brokerage also a market maker?
The arms race where you never get to zero.
Like the article says, it's very hard to distinguish between market making and prop trading. Especially in illiquid stuff like corporate bonds, the MM needs to hold positions for extended durations, so they have a valid excuse to not be closed down entirely by Volcker. The real reason they make all that money is flow. The guy on a desk like that knows what customers are calling, what they're concerned about, roughly…
Market making is inherently prop trading - the firm's capital is at risk - unless trades are paired or hedged immediately. For thinly traded stuff that may take a while to unload, it is just prop trading. I personally think Banks should be incredibly boring utilities. But that ship sailed a long time ago. Lots of great stuff was thrown out the window in January. My winning bet for the year was to start buying EWC (is…
Earlier quoted context omitted.
Market making is inherently prop trading - the firm's capital is at risk - unless trades are paired or hedged immediately. For thinly traded stuff that may take a while to unload, it is just prop trading. I personally think Banks should be incredibly boring utilities. But that ship sailed a long time ago. Lots of great stuff was thrown out the window in January. My winning bet for the year was to start buying EWC (is…
Would you mind explaining what prop trading is? I am not familiar with this term. From what I know of market making however is that you match a buyer and a seller of an asset, correct? If I do have this correct about market making. Are they playing ask buy spread? Whose best interests is the market maker supposed to look out for? The buyers? The seller? Some combination therein?
1. is basically market making. You can either wait until you have a matching trade and take a cut (=exchange, broker). Then you're always flat (that is, you don't care where the price moves - you always get your cut). Or you can post bid and ask at which you are prepared to trade. When someone avails themselves of this, you then have a position, and the market might move against you. The spread compensates for that risk. Key here is to distinguish informed traders (that offload stuff on you before the price drops due to some news) from "dumb money", aka noise traders, that just want to buy or sell some stuff, but don't have information where the price will go. The latter make you money on average, the former might cost you.
2. That's basically manufacture of derivatives, say. You buy or sell an option, charge something on top of the computed price, and then trade underlyers against it to be flat, and at the end ideally realise that charge.
3. This is basically prop trading. If you put on the proper position, and your view turns out right, you make money, otherwise you lose. You need to be right more often than wrong :-) and quite some capital cushion to balance out the wins and the losses.
So, prop trading is characterised by you NOT being flat, i.e. you are exposed to market moves. As someone pointed out, when you are market maker, you are also exposed, but it's for short periods of time, and not the main goal. However, this does introduce some ambiguity.
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Is their $12/12 weeks method ~really~ that effective for news aggregation websites such as HN or Reddit? Unless you've been a subscriber to the physical subscription, and enjoy it I see no reason why someone from one of these sites would subscribe.
I would gladly pay $1/week for the WSJ. Reporters and editors have mortgages to pay and families to feed. The problem is that's a teaser rate. The current rate for 1 year is $277. That's way more than I'm willing to pay for a single newspaper.