3 ms·

You make market making sound very easy, but let me tell you, it really isn't. Quoting correct big/ask spreads that are competitive, leave you with some profit,

• dcolkitt 6y ago
  I agree with you, but think OP has something different in mind than you. Market making in an open, competitive space (e.g. prop shops competing on a public exchange) is extremely difficult. But I get the sense that OP was talking about captive flow. You do see this a lot on sell-side desks. Some client approaches the bank to do a trade that's ancillary to their business. E.g. a large multinational needing to hedge its FX exposure. They're mostly selecting the bank based on the overall reputation and relationship with the franchise. If the desk squeezes them for a few basis points on a cross-currency swap, the client pretty much doesn't care, let alone seeking out competitive pricing on individual trades.
  • ackbar03 6y ago
    Yes this is what I meant. Basically if your in sell-side trading, corporate flows are your bread and butter. The way it works is some corporate customer has some hedging need and the sales desk slaps on a big fat margin that contributes to the majority of money being made. The trader sees this and he's a greedy sob too so what he does is he quotes the sales desk an internal price that is further away from the true market bid-ask. This usually involves some degree of bickering depending on how well the two desks get along, and whatever the trader is able to get away with contributes to his "trading" pnl. And yes it is as pathetic as it sounds and involves a fair bit of weaseling around. Less the case if your client is a financial institution though, in which case it more depends on how many flows and trades you get and hope it matches off