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Jurassic


Total Posts: 208
Joined: Mar 2018
 
Posted: 2019-05-15 11:14
I dont understand how electronic market making in banks in more illiquid products works. Im not looking for a deeply technical (ie mathematical answer).

As I understand, if you get an order from client you ideally want to instantly receive bid-offer for that. If you cannot do this I assume you want to partially fill the order, but this still leaves you with a remaining order which must be added to some inventory. In a somewhat liquid market this could be executed like an execution algo on the buyside. However, in a more illiquid market the price may move against you? How do you deal with the remaining inventory? Whats the general idea?


tbretagn


Total Posts: 272
Joined: Oct 2004
 
Posted: 2019-05-15 13:55
Two things:
a) That's what bid-offer is supposed to help you contain
b) Inventory on beta products

If it's really illiquid (for example ARS in FX), there's usually someone behind the toy. The platform is electronic, but the market-making isn't in that sense.

Et meme si ce n'est pas vrai, il faut croire en l'histoire ancienne

Jurassic


Total Posts: 208
Joined: Mar 2018
 
Posted: 2019-05-15 15:44
a) the "strategy" is to work out how long it statistically takes you to get out?
b) how does this help?
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