5 ms·

When market making its not really possible to lose 200k in a "black swan event" in regards to price movements. A software error on the other hand...

• qeternity 4y ago
  What?! Of course it’s possible
  • vgatherps 4y ago
    It’s theoretically possible but as the poster mentioned fairly difficult/rare outside of options, and even then those tend to be more like “vol book gone bad”, “long term position gone bad”, and less like “hft MM strategy gone bad”. A bad strategy could lose 200k over the course of a day if allowed to run, but again I think the poster was referring to discrete events in a short period. Crazy events tend to be money printers outside of the initial bad trades since there’s a ton of volume, wide spreads, and general chaos following. Most MMs run taker strategies as well, and in fact many of the large ones make most of their money taking even if volume is evenly split.
    • qeternity 4y ago
      You’re ignoring survivorship bias. Bad market makers don’t last long, precisely because it’s possible to lose a lot of money. More realistically, a strat without edge gets eaten alive by costs, or by toxic flow (as other MM are either better at pricing or faster at getting out of the way). But yes a decent HFT MM will have down and out circuit breakers.