Apart from this, sending bids and offers to the market serves another practical goal. Euronext Liffe is charging less when you are providing liquidity to the market.
It’s not unusual for a lot of market makers to send the widest possible quotes – only quoting for the fee discount. I wondered whether all small market makers could survive in a difficult market with tight spreads and low volume. Euronext gave supplied a nice overview of the current market makers compared with one year ago (thanks).
Some new participants joined the market, and some decided to call it quits.
Never really understood why, but fact is Goldman Sachs has been registered as liquidity provider for at least a decade. Can’t imagine them interested in the small size trading in the screen. They checked out last year.
More worried about a few other firms. Calimero Trading never was in the business for world domination. Quoting in ING, RD and almost a dozen illiquid stocks (Boskalis etc). Alas, the firm with the cute name probably has shut its doors.
Another firm leaving is ABR Financial. Backed by a Russian investor, they haven’t been able to compete in the option market.
Wintrading traded all AEX options including daily’s and weekly’s. Founder Fred Winia left trading in 2002. With Rien de Vreede, Wintrading stayed a liquidity provider until this year.
Some new firms have signed for providing liquidity on Euronext Liffe.
Maven Trading is only active as liquidity provider in the AEX index options. In contrast to Wintrading, this isn’t a one man show. This British firm consists of two dozen former traders from especially Tibra, Optiver and Liquid.
Webb Traders decided to expand beyond their ETF arbitrage area to the option market. Doing ten small stocks (Vopak, Delta Lloyd etc).
Former All Options traders MMX decided to go for the Euronext options too. Over a dozen CMM licences. However, no index options.
Comparing the list of market makers per option class can reveal strategic choices being made. Or a forced shut down of loss making units. One firm joined the action in nearly every single stock – Susquehanna (SIG).
The most popular options are the AEX index options, and the number of liquidity providers increased this year. Six new entries, of which especially Scrocca and 323 are notable. Both of them never burned their hands on index options – and quoting almost every single other stock on Euronext.
Also interesting is Timber Hill trying the weekly options while still staying away from the Daily AEX. Leopark, on the other hand, stepped out of the daily and weekly index pit.
in: EXT, The Hague Options, Maven, Susquehanna, Scrocca, 323
out: All Options, Goldman Sachs, Wintrading
Checked a random largecap stock. The ING crowd welcomed EXT and MMX, while six firms threw in the towel. All Options, HOT, Hardcastle, Goldman, ABR and Calimero are gone.
All Options is leaving all the seriously traded stocks. Probably as part of a deal between Euronext and Jakobs, they remain the only liquidity provider in Mediq. Last year they have had some company from Tibra – but the Australians left Mediq. And stayed everywhere else by the way.
One stock liquidity providers
Also a major shift at Inhouse trading. In 2011 it was only providing liquidity in Fugro. This year he switched to the golden mountains of AMG. The other true specialist, Cross Options, was happy to stay only active in ING. Difficult to see the rationale of maintaining expensive fixed costs (lines, membership, software) for just one little source of revenue.
Multiple exchanges and trading venues mean more expenses. Connection lines, proximity hosting and faster software on one side, and less volume and narrow spreads on the other side. Tough times for small market makers, a serious shake out looms.