Tag Archives: rading Obligations

High-Frequency Strategies That Rely on Trading Obligations of Market Makers

High-Frequency Strategies That Rely on Trading Obligations of Market Makers

I am exploring the topic of high-frequency strategies that specifically rely on various trading obligations of market makers, which are largely set by trading venues as self-regulatory organizations. Conflicts among formal market makers and certain types of agile traders exploiting various institutional and regulatory frictions isn’t a new phenomenon (think about the SOES and RAES “banditry” in the olden days), and this is still going on in today’s securities markets. For instance, I am aware that high-frequency strategies gaming trading obligations of market makers do exist, and, in their turn, market makers employ special “combative” algorithms. I’d be forever obliged if you could share your insights on this topic (on a very basic level and without revealing any proprietary information of course). For instance, have there been any attempts to game a recent prohibition on “stub” quotes applicable to market makers? This is for a paper of mine dealing with certain aspects of U.S. securities law (which is available at http://ssrn.com/abstract=2032134). Thanks!

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