NYSE Liffe opens market for liquidity providers
The liquidity provider licenses used to be a closed shop at NYSE Liffe. Once a firm was “primary market maker”, quoting all available options in a certain class, they usually could hold on their quoting position forever. These quoting licenses were limited, usually only 3 for smaller stocks to around 5 for the bigger ones as ING and RD. An interesting consequence were the traditional yearly play off for the licenses, like this one early 2013.
This time it’s different. Euronext Liffe apparently has found some capacity and from now on any market maker can be “primary market maker” wherever they like. More or less comparable with the Eurex model, where everyone can start quoting when they feel like it.
Just one play off
There’s just one play off this year, in SBM Offshore. The following six firms are competing for five available spots. Scrocca has performed better than the rest last year and is safe.
- All Options
- Webb (Caerus)
- IMC
- Nino
- Optiver
- 323 Trading
Ten full size market makers
Without the usual play off battles to announce, decided to have a look how many market makers firms are quoting on the Amsterdam market. According to this list there are 31 market makers in the derivative market. However, three firms operate with a double entity:
- Optiver uses Optra VOF and Optrix VOF
- Scrocca uses Scrocca Option Trading BV and Fluhalp Trading BV
- Webb Traders use Caerus II BV and Caerus III BV
This gives us 28 different market makers. Checking the full document who’s quoting what (warning, one complex matrix – requiring you to print it), and we can distinguish ten market makers :
- All Options – quoting everything except large caps and index
- Webb Traders – former Caerus, quoting all stock and index options
- IMC – all large caps and index
- Nino – all large caps, a few smaller stocks. No index.
- Leopark – all index options including Daily and Weekly AEX. A dozen mixed stock options.
- Optiver – all large caps and index
- Susquehanna – everything, but mostly as CMM
- Scrocca – almost everything as PMM, except for index. No daily or weekly index options.
- Timber Hill – the fully automated firm part of IB is cmm in two dozen stock options and index. Weekly AEX, but no Daily’s.
- 323 Trading – almost everything as PMM, except for index. No daily or weekly index options.
The other 18 firms are only active as trader in the index (where they could be big of course), or limit their classes to just a few stocks. InHouse is still doing AMG and AEX and there’s this French firm Mosaic active in Air France.
EXT folded
One of the firms missing this year on the list is EXT. Once started as one of the seven start ups from the ruins of Van der Moolen, the firm has shut its doors. Both former owners continue with Better Options. The mother firm in Hong Kong, AXT, has been liquidated earlier. This makes Webb Traders the only surviving VDM spin off on the continent.
Timber Hill joins TOM
Small news from TOM. The fully automated market making part of Interactive Brokers has been connected to TOM. This ain’t too spectacular news in itself, but this could imply Interactive Brokers may be connected to TOM. That would be a major shift in the derivative exchanges landscape. So far only founders Binck/Alex are connected with TOM, which isn’t a healthy situation.
What software is everyone using for quoting these days?
orc, tbricks, actant, click station, prop, take your pick
What is the problem with Source Capital AG? Why are lots of people leaving?
rough year, no pnl, out you go
in addition to that, very bad management. Also those who do not know about the pl are leaving…Will this company still exist in 6 months?
define ‘very bad management’
why is people unaware of poor P&L leaving?
who cares if Source Capital folds up, the rest of the world is still as clueless as how much gut wrenching churn is going on underneath
Is “Mr Define” back in town?
lol
”
define ‘very bad management’
why is people unaware of poor P&L leaving?
”
bad management = when people unaware of P&L leave
nice definition, hope the define guy also accepts it
i am missing the ‘yah’ guy here
shouldn’t the people unaware of poor pnl be pushed out if a) they are so clueless and b) they wouldn’t be required with less pnl to go around?
looks like a savvy management to push out such muppets
define yah
define “Source Capital”
source of pure liquidity
Source of Poor Liquidity
Yah
so you are the ‘yah guy’?
define “you”?
‘you’ is used to refer to the person or people that the speaker is addressin
you
you people
yah
this forum is not a kindergarten, write something interesting what is not known in the public domain about Tibra, IMC, Source Capital, Maven etc, rumors are very welcome
ban this guy with comments about define and yah
OptionsCity is the new trading platform and visiting Amsterdam very soon. Known in the community as “The Orange guys”….
there is no need for new trading platform, just get the trading fees lower pls
on TOM they are lower
can the OptionsCity then stop wasting its time ?
Excuse my naive question: I guess that all of these market makers are living off market making, from the spread, so to say. Any idea why aren’t there any big banks, doing it just for the rebates?
there are no stupid questions or stupid answers, just stupid people
big banks don’t want to have prop market making franchise as it doesn’t fit in with the rest of banking, relationship agency model they have; having said that goldman, bnp do run quite a bit of this principal prop trading etc, but its a hard sell given all the dodd-frank, volcker, regulatory pressure etc
Banks have tried taking over and running MM firms (Hull, O’Connor etc) but have generally failed.
If your trading space is essentially the interbank market then it does not really help if you’re part of a bank yourself.
Not sure I was clearly understood: I’m asking why don’t big banks enter the MM business just for saving money; that is, if you are a big bank and have a big flow then it would make sense to be a MM just so that you save on costs. You maintain quotes for a minimum number of instruments, with the minimum quote quantity and maximum spread, just to fulfill the MM obligations; and when you need to get rid of some positions you can do it at a lower price (since as a MM you get better deals from the exchange).
yes, i figured initially that was your question but then that was actually trivial point that the reply went in another more relevant direction
anyways to your point, you have to put yourself in management shoes when it comes to making this decision about cost-benefit analysis of rebates – the cost of mm infra, potential blow-up, compensation package, regulatory pressures is just excessive in compared to tiny rebate you might generate on option volumes. But to your credit, goldman etc do maintain lot of execution infra to help facilitate the buy side volumes and principal trading, the crucial difference being volumes in delta-one vs options
So, if one has the infrastructure already because of the existent linear business, and it already has the apparatus for dealing with the regulatory bureaucracy, (only) then it migh as well go the extra mile for the options discount mm…
Thank you.
what’s with ‘thank you’ junior
why is linear infra guys going to support non-linear work when there is so limited upside, and how do you conclude linear and non-linear regs are same, you clearly haven’t worked in a big bank?
mr senior, I’m assuming the infra guys are the same, be it linear or non-linear. It’s just infrastructure, geeks and hardware. When one rents a rack in colo, one can use it for both derivatives and equities. Same with the geeks. So the two different desks split the infra costs. Not sure about regs, do they really differ that much? HFT regs should be the same, be it equities or derivs…
@junior you’ve got to be kidding. The regulations are very different for each of equities, futures/ETOs, and warrants. Risk management is very different when you do derivatives. You also have to consider “Chinese wall” requirements, where you’re obliged to keep your business interests separate and information confidential between e.g. investment and market making. You’re making the same kind of mistake as the founders of Tibra who thought that because they’d had some success in one area they could automatically replicate it in another that had almost nothing in common.
haha, junior is taking it personally, okay how about non-junior?
well how did you reach the conclusion that infra guys for the linear and non-linear is same? why would someone do double the work for same pay?
you can keep arguing for economies of scale but then you don’t know how big banks work, clearly you haven’t worked in one. And be careful before you go on using the word ‘should’. You know what, grow up first and try to get a sense of humility of what can and can’t be done.
I can understand that such regulations differ; probably every big bank already fulfills these regs.
But in order to be a MM they just need to fulfill some (HFT-related?) additional regs; and these additional regs probably don’t differ that much.
Why would the infra guys be different? From a technical point of view (hardware, networks, software) the tasks don’t differ much.
It’s just the pricing algo that differs. Ok, if you want to live from the spread and be the best, maybe there are subtle differences that I’m not aware of.
But it’s only about staying in the ring without getting hit (quote as wide as allowed). Just for the discounts, optimizing the flow.
just be patient, reality would down you on in few years time, you are riding high with your young gun hot-shot trader motif, it’s hard to get anything past you with those eyes blinded with twisted lens