Not aware of a market maker that also doesn't take liquidity as well. In fact, it probably would impossible to market make without also taking (you wouldn't be able to provide liquidity if your quotes were in cross with the market).
That said market makers do a lot more making than taking.
Sorry I meant to say buying puts (and have edited comment). Buying puts is directional and has negative carry. That's often fine because when your puts aren't making money your market making strategies should be doing well and vice versa
Generally good article that delves into how a market maker functions. Couple points:
Re EA: quoting my boss, EA isn't really a dominant thing in the market maker space, it's pretty much only espoused by a couple high profile individuals (mainly, SBF).
Re strategy: point about how there's little strategy involved in being a market maker is off-base. Everything is ultimately strategy: do I continue to pour resources into a strategy that is losing money in the hopes of eventually seeing pnl? What markets should I focus on? What is the best use of time for each employee that maximizes pnl/head? etc etc
One thing that I thought article got right is that most work involved in market making is about avoiding trades, not making them. Capturing the bid ask spread is conceptually easy. The hard part is avoiding trading with toxic counterparties.
Part about put options is especially apt. Market making during a crash / recession (like right now) is especially difficult because all the non-toxic counterparties have stopped trading as much (people like to trade a lot more during a bull market than a bear one). By setting up a structure such that you profit during a crash (either by buying puts, leaning net short, or through some other method), you introduce an uncorrelated return stream that can really help.
What about Puerto Rico? I moved here 6mo to take advantage of the lowest taxes an American can get and it's pretty livable. Of course English is spoken as a second language, but all in all it's pretty livable
I'm not unaware I have been very personally affected by the opioid crisis. And I don't think the pharma companies are responsible. I haven't met a single opiate addict (and I've met far too many for one lifetime) who blames pharma companies.
Hedge funds weren't the real winners, but rather prop shops/market making firms. January was the best month in the history of the universe for all the major prop shops: Citadel, Jane St, IMC, etc.
The two "vols": volume and volatility are the corner stones of all market making performance. Bonuses are mighty fine this year, that is for sure.
no not really. you can use public information to give you an edge. And I say this as a person who trades and develops models at a vety successful market making firm.
Alternative data no one else can get easily certainly has tremendous value though.
Of course, predicting one or two seconds into the future (my primary concern) is easier than days or years, so there's that.