Market Making

Read these first

1. 01Markouts: Measuring Post-Trade Drift

   A fill that looks profitable against the spread can still be a loser once you check where the price went in the seconds after, a markout tracks exactly that, and it's the single most honest number a market maker has.

2. 02P&L Attribution For A Market Maker

   A market maker's daily P&L is one number, but it comes from at least four different sources that behave nothing alike, spread capture, rebates, inventory mark-to-market, and adverse selection, and lumping them together hides which part of the business is actually working.

3. 03Skewing Quotes To Manage Inventory

   A market maker sitting on unwanted inventory doesn't just wait it out, it nudges both quotes in the direction that encourages the market to take that inventory off its hands, accepting a worse expected price in exchange for less risk.

4. 04The Economics Of Market Making

   A market maker's revenue is the spread earned on fills, and the cost is inventory risk plus getting picked off by better-informed traders. The business only works if spread capture, repeated thousands of times a day, outruns those two costs.

Then the rest

1. 05Backtesting A Market Making Strategy
2. 06ETF Market Making And Create/Redeem
3. 07Fill Ratios And Hit Rates
4. 08FX Market Making And Last Look
5. 09Hedging A Market Maker's Book
6. 10Internalisation And Wholesale Market Makers
7. 11Inventory Limits And Position Caps
8. 12Market Making In Stressed Markets
9. 13Market Making With A Directional Signal
10. 14Multi-Asset Market Making And Correlated Inventory
11. 15Options Market Making
12. 16Quoting Around Scheduled News
13. 17Rebate Capture Strategies
14. 18Segmenting Client Flow
15. 19The Grossman-Miller Model
16. 20When To Requote
17. 21Stochastic Control Formulations Of Market Making