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As a market maker, I do NOT want the exchange also making markets, which puts them in direct competition with me.
by HockeyPlayer 15y ago
As a market maker, I do NOT want the exchange also making markets, which puts them in direct competition with me.
- byrneseyeview 15y agoFor sufficiently fungible products, the "Market Maker as Exchange" model works really well. What you'd basically have is high spreads for retail investors, and lower spreads for institutional investors. So your consumer-facing company would make a spread and then flatten its exposure by trading with other market-makers. This gives the "Exchange" more flexibility than Mt. Gox has. It can offer more competitive prices when it's worthwhile, and pull back if trading with retail customers gives it too much net exposure. That's better than having a fixed fee for matching people with market-makers. This is a rough approximation of how forex works.