Advanced Market Making
Step-by-step components of a market making system with advanced elements
Introduction
So you want to do market making? Perhaps you’ve seen some screenshots of those double digit Sharpe charts doing huge returns, and want to do something a bit more advanced than a pure arbitrage based approach? Well, you’re in luck. In this article, we’ll break down each component of a proper market making system and how to do it successfully.
There is obviously a large gap between doing it very well on a small exchange and doing it very well on Binance. My definition of successful will lean towards the small exchange definition since if I had alpha on Binance then I’d be making a fortune. I’ve done that in past roles (not with the same team anymore to do it again), and it’s no small feat. We had some of the best latency tech out there, plus a large team and it still took lots of work.
In today’s article, we dig into how to do market making effectively and continue some of the points from the market making for dummies article with more advanced tricks as well as recaps of simpler parts (but with expanded information on how to do them properly that didn’t cross my mind to include when writing the past article).