Said it before and i'll say it again - you are an absolutely incredible teacher. One of the only people on youtube smart enough to understand a topic and explain it clearly and concisely to people who don't! Other people just try to teach you as if they're just going over it again in their heads.
Thanks. I am thinking of putting together a short financial markets guide/book to go with these videos. If that would be of interest maybe viewers can tick here.
Cheers for the video content! Excuse me for chiming in, I am interested in your opinion. Have you considered - Mackorny New Smile Blueprint (should be on google have a look)? It is an awesome one off product for winning at options trading fast minus the normal expense. Ive heard some awesome things about it and my old buddy Taylor at last got great success with it.
GameStop has brought me here. Citadel is a leading Market Maker. This video just gave me chills in all honesty. Everything is beginning to make sense. I hope for the best once the dust settles
Best Video I have seen on Bid/Ask. Don't need to watch any video. This guy knows his stuff and he has effective communication skills. I am going to watch more of his Videos. Thanks a lot. Keep up the good work.
ConfusedLad27 - yes in liquid shares an order book can electronically match buy and sell orders provided the prices agree. Market makers are increasingly used in less liquid markets or markets where there is no central exchange (e.g. the bonds market).
you are awesome. I've been watching your videos for over a year now and you've never disappointed. I rarely write comments or compliment people on their work but you are great!
How do market makers get their shares? Are they required to maintain a pool of some of the most illiquid shares on the exchange to provide liquidity? Do they sell naked shorts if you want to buy some shares that no market maker has?
Most of Trading Educators run their courses on behalf of Market Makers (Brokers), these educators themselves don't make a profit by doing trading but they encourage their students to do trading !
You were great at explaining this concept! I really appreciate your content, and I will definitely use your videos as a guide to investing in the future. Thanks!
I have an interview lined up for a trading company here in chicago that does derivative market making, thanks for the video, it was a good concise overview of what I'll be expecting
the example you refer to would be someone who wanted to sell below the bid price. in which case their order would be filled above your ask price to buy.
but is the real market price being decided by a mathematical function in the exchange algorithms or who makes the market price given there is a big spread for example?
Lets suppose that in one specific security there is one market marker set by the stock market system to make a market. Also lets suppose that a typical public trader has the information about the bid and offer prices the market maker offers and lets try to figure out what will happen if that trader trys to compete with the market maker. It seems that he is having three options. We cannot analyze any options including any diversification in the offer price because we suppose that the trader doesn't own the particular stock at the beginning. So option one is to give a lower bid price than the market maker,second option is to offer the same bid price and last option to give a higher bid price than the market maker. Option one makes no sense since no one would sell his shares at the traders lowest bid price as soon as he can see that the market maker offers a higher buing price. Option three seems competitive enough at a first glance since an owner of a stock that wills to sell his stock will be happy to accept a buy offer higher than the one that the market maker offers. The trader now can offer a lower selling price for the stock he purchased than the selling price the market maker offers. So it seems that the market player is beaten. But this holds only as soon as the diffence in the bid price of the trader and the bid price of the trader is lower than the spread caused of the market maker. So it follows that the market maker can beat option three by decreasing his offer price and obviously his profits in order to eliminate option 3 three. I think that a rational trader would adopt option three, Option 2 now seems to overcome the problem thas was hiding behind option three since the market maker cannot decrease enough his offer price to beat the trader for the reason that both him and the trader bought the stock at the same price. Of course he can lower his potential profits by decreasing the offer price BUT the trader can adjust to that by additional decreasing his own profits. The result will only decrease the spread in a pure competitive enviroment. Now since i dont know almost anything about the stock market, i have a question at this point. Lets suppose that two persons owns 10 shares of a specific stock at lets say that they both want to sell all of their 10 stocks at the same price. So they both seek for a buyer that wants to buy at that price the stocks they possess. LETS ALSO SUPPOSE THAT THOSE TWO PERSONS ARE THE ONLY ONES THAT WANT TO SELL THAT SPECIFIC STOCK AT THAT SPECIFIC PRICE AND NO ONE ELSE WANTS TO. Okay now lets say that a buyer appears that wants to buy that stock at that SPECIFIC PRICE BUT he wants to buy ONLY ONE STOCK. Question is from whom seller will he buy? The answer to that question is really important to the above scenario of the trader and the market player. Because then i will be able to think about what will happen if the market player and the trader that follows option two will do in the case that no one of them is willing to decrease their profits any more and both of them stays at a certain offer price. Of course that is only a simple situations because it is not taking under account the fluctations in the price taking place meanwhile but its a first step to understand better the concept around market makers.
@MarketDepth Are assets because the "packaged debt" is giving access to the cashflow generated by the "packaged debt". Securitization is the name of the packaging industry in this case. Banks give the loan, then they package several loans, they sell the package and get resources to lend money again. The buyer, get the cashflow at a discount from present value taking the risk of the underlying assets of these derivatives.
Did you make guidebook? Can be so much easier to have pdf/ebook on hand; Check contents/index for your needed topic or search the book entire text for phrase in 5 sec.. Nice to be just old enough to have experienced the change from pit 2 'puter from beginning to end. I'm sure that the 10,000% increase securities types now avail to traders, and which took place in a decade, is solely due to the equally impressive volume increase in 10 years of likewaise 10k%
Maybe a dumb comment. If I want to buy share of XYZ, why would I buy at 120, when I know the market maker is buying at 100? Why can't I buy at 100 directly to those willing to sell at 100 to the MM? Btw: you're a fantastic teacher I fully agree
hi, great video, one question, you are saying the more market players the narrower the spread, because more players mean there is more room for you to negotiate how much you want to pay?
Great video firstly! However, is there not only 1 market maker per stock? If for example there were loads, would'nt things get reali confusuing as to the numbers of trades going through. Also are Market Makers decided by the company before their initial public offering?
@MarketDepth Maybe we should discuss this in the derivates video. Let me give you more information: the way to package debt is very particular. Basically, the loans are sliced in three: the best part (the first payments, less likely to default) the medium and the low. All of them are pooled with other similar pieces of debt to create a single package. When the crisis of 2008 started, trying to get a valuation of these assets was almost impossible.
Great explanation, my thanks. So if a client placed a limit sell order at 110p, would it complete, or would the price have to rise 10p until bid price is 110p and offer price 130p (assuming spread remains constant)? I.e. does the market maker always protect their margin!?
sometimes i see out of market trades? how is that possible? and why is it that i often see the same bid and ask numbers (like 176 stocks listed for dozens of time in the book) ?
How do market makers hedge their directional risk. Do they start out with zero shares and sell shares they don't have and then let people buy those shares later? What if large orders come in, do they take it and hope to balance it out later?
Thanks for the video, it's very helpful. I'm a little confused about how market makers deal with the risk posed by holding securities in inventory. Is it simply reflected in the spread offered?
furthermore, if it is in market maker's interests to buy when the spread is larger, why not make the price go down of shares as well in order that people panic and sell? or is that what happens anyway...
I am a big fan of your videos. Instead of putting them in a book, if you can put them in a DVD, I will buy it happily! Although I would appreciate if the DVD comes with more products like structured products, further elaboration on all of them (like the various bond types etc) and more examples in each video. Also if there are videos for banking processes like the back office processes, what treasury do and how it does what it does etc it would be great.
The "spread" may be 20, but themarket maker's profit is not 20 but 10. It is 10 because the true market price is in between 100 and 120. So the actual market price is 110, but the ask price is 120, 10 profit. Likewise, the market price is 110, but the bid is 100. 10 loss for you, but 10 profit for the broker.
Where does MMs get their shares from? Say in a bull market no one if willing to sell their shares and there is a lot of buying power from investors. What happens when MMs sell all of their shares?
IN practice it doesn't really happen. IN a bull run the MM will start accumulating float of their own at better prices than investors. If the situation gets desperate then they may tree shake and manipulate the price action to scare people in to selling.
of course, if you find a person who is willing to sell for £1.05, you can buy it for £1.05. The problem is finding the person. Usually you don't know anyone, so you have to ask a broker. The broker knows someone who sells for £1.05, so he says to you 'I can sell you for £1.15'. After all, the broker is no different to us. He is an employee working for his salary in a stock exchange company and he needs to make some money too!
or is there "any" obligation to price the share correctly. Ie will a market maker (s) be punished for pushing a share price down so low that it unfairly represents the market cap? because i have seen this many times...
why would takers pay a higher fee than makers? and The liquidity we talk about, is it the asset being traded or FIAT? in terms of XRP, a bridge asset for x-border payments: would liquidity there mean FIAT liquidity or XRP liquidity or both?
i am so happy to meet mason Willie, who is an investment and trade specialist,with the returns on my investment each week i can say that mason is the most reliable trader in today's trading market, i am so happy
Said it before and i'll say it again - you are an absolutely incredible teacher. One of the only people on youtube smart enough to understand a topic and explain it clearly and concisely to people who don't! Other people just try to teach you as if they're just going over it again in their heads.
Very intelligent and knowledgeable. Its a gift to be able to explain difficult concepts in an easy way.
By far the best explanation of market makers I've found on YT.
Thanks. I am thinking of putting together a short financial markets guide/book to go with these videos. If that would be of interest maybe viewers can tick here.
Cheers for the video content! Excuse me for chiming in, I am interested in your opinion. Have you considered - Mackorny New Smile Blueprint (should be on google have a look)? It is an awesome one off product for winning at options trading fast minus the normal expense. Ive heard some awesome things about it and my old buddy Taylor at last got great success with it.
hey did you end up making that guide book? Id love to have a copy. thanks!
@@rohandat good question
Hey man have you put together that book? Your video's are the best financial explaining material on youtube zero doubt
GameStop has brought me here. Citadel is a leading Market Maker. This video just gave me chills in all honesty. Everything is beginning to make sense. I hope for the best once the dust settles
🦍🚀🌙♾
that's right, they are making money off you guys. I have 2 shares myself but I am not holding my breath that's for sure.
Wow I’ve being trying to learn as much as possible glad it’s other apes here to 💙we’re mooning soon
No, Citadel is not a market maker. They’re a hedge fund.
@@Fred-zt5kylol citadel is the largest mm in the US stock exchange
Best Video I have seen on Bid/Ask. Don't need to watch any video. This guy knows his stuff and he has effective communication skills. I am going to watch more of his Videos. Thanks a lot. Keep up the good work.
im 1 min into this video and so much has clicked in my head with what u have said, thanks man.
This is the best explanation I've seen so far. Thanks!
ConfusedLad27 - yes in liquid shares an order book can electronically match buy and sell orders provided the prices agree. Market makers are increasingly used in less liquid markets or markets where there is no central exchange (e.g. the bonds market).
you are awesome. I've been watching your videos for over a year now and you've never disappointed. I rarely write comments or compliment people on their work but you are great!
Very simple but one of the best explanations I've seen for average people.
Best finance tutorial videos, and best channel on RUclips. My first stop whenever I want to learn. Please keep on posting Tim
How do market makers get their shares? Are they required to maintain a pool of some of the most illiquid shares on the exchange to provide liquidity? Do they sell naked shorts if you want to buy some shares that no market maker has?
please make more videos like these, because i understood the theory within 8 minutes, while i cannot understand my textbook after reading for 2hours
so good! Thank you for your fantastic explanation. Great job 💪❤🔥
This is one of the most important sources helped to complete my MBA
Most of Trading Educators run their courses on behalf of Market Makers (Brokers), these educators themselves don't make a profit by doing trading but they encourage their students to do trading !
Hey man - this was very helpful. I feel like I knew most of this, but you certainly helped fill in some gaps. :) Thank you.
Wow, what a great explanation of market makers. This is exactly what information I was looking for when I clicked this video.
3:22 Says "X Y Zed", writes down "X Y 2" then corrects it to "X 4 2"
This is for market orders. You can submit limit orders instead. You may not get a fill, but if you do it'll be at your price, not a market maker's.
You were great at explaining this concept! I really appreciate your content, and I will definitely use your videos as a guide to investing in the future. Thanks!
6:56 Are market makers also involved in futures markets?
Excellent explanation. Thanks🙂.
I have an interview lined up for a trading company here in chicago that does derivative market making, thanks for the video, it was a good concise overview of what I'll be expecting
the example you refer to would be someone who wanted to sell below the bid price. in which case their order would be filled above your ask price to buy.
but is the real market price being decided by a mathematical function in the exchange algorithms or who makes the market price given there is a big spread for example?
You explain things so simply and well.
Lets suppose that in one specific security there is one market marker set by the stock market system to make a market.
Also lets suppose that a typical public trader has the information about the bid and offer prices the market maker offers and lets try to figure out what will happen if that trader trys to compete with the market maker. It seems that he is having three options. We cannot analyze any options including any diversification in the offer price because we suppose that the trader doesn't own the particular stock at the beginning. So option one is to give a lower bid price than the market maker,second option is to offer the same bid price and last option to give a higher bid price than the market maker.
Option one makes no sense since no one would sell his shares at the traders lowest bid price as soon as he can see that the market maker offers a higher buing price. Option three seems competitive enough at a first glance since an owner of a stock that wills to sell his stock will be happy to accept a buy offer higher than the one that the market maker offers. The trader now can offer a lower selling price for the stock he purchased than the selling price the market maker offers. So it seems that the market player is beaten. But this holds only as soon as the diffence in the bid price of the trader and the bid price of the trader is lower than the spread caused of the market maker. So it follows that the market maker can beat option three by decreasing his offer price and obviously his profits in order to eliminate option 3 three. I think that a rational trader would adopt option three,
Option 2 now seems to overcome the problem thas was hiding behind option three since the market maker cannot decrease enough his offer price to beat the trader for the reason that both him and the trader bought the stock at the same price. Of course he can lower his potential profits by decreasing the offer price BUT the trader can adjust to that by additional decreasing his own profits. The result will only decrease the spread in a pure competitive enviroment.
Now since i dont know almost anything about the stock market, i have a question at this point. Lets suppose that two persons owns 10 shares of a specific stock at lets say that they both want to sell all of their 10 stocks at the same price. So they both seek for a buyer that wants to buy at that price the stocks they possess. LETS ALSO SUPPOSE THAT THOSE TWO PERSONS ARE THE ONLY ONES THAT WANT TO SELL THAT SPECIFIC STOCK AT THAT SPECIFIC PRICE AND NO ONE ELSE WANTS TO. Okay now lets say that a buyer appears that wants to buy that stock at that SPECIFIC PRICE BUT he wants to buy ONLY ONE STOCK. Question is from whom seller will he buy?
The answer to that question is really important to the above scenario of the trader and the market player. Because then i will be able to think about what will happen if the market player and the trader that follows option two will do in the case that no one of them is willing to decrease their profits any more and both of them stays at a certain offer price.
Of course that is only a simple situations because it is not taking under account the fluctations in the price taking place meanwhile but its a first step to understand better the concept around market makers.
4:51 = all you need to know
This channel is so good. 👍🏻
I’m really wondering how active ETFs are managed and how market makers hedge their position. please please let me know!!
Great vid
Excellent explanation!
What's the name of the spread around 6:06???
Thanks for the info, that was Crystal clear!
Great overview. Much obliged for taking time on this topic.
Cheers!
@MarketDepth Are assets because the "packaged debt" is giving access to the cashflow generated by the "packaged debt". Securitization is the name of the packaging industry in this case. Banks give the loan, then they package several loans, they sell the package and get resources to lend money again. The buyer, get the cashflow at a discount from present value taking the risk of the underlying assets of these derivatives.
Awesome lecture. You did an amazing job
Did you make guidebook? Can be so much easier to have pdf/ebook on hand; Check contents/index for your needed topic or search the book entire text for phrase in 5 sec.. Nice to be just old enough to have experienced the change from pit 2 'puter from beginning to end. I'm sure that the 10,000% increase securities types now avail to traders, and which took place in a decade, is solely due to the equally impressive volume increase in 10 years of likewaise 10k%
Great video...very clear and helpful, thanks
Hello, I loved the video... very helpful! What are the market maker differences between NYSE (or some other big exchange) and the OTC market makers?
Maybe a dumb comment. If I want to buy share of XYZ, why would I buy at 120, when I know the market maker is buying at 100? Why can't I buy at 100 directly to those willing to sell at 100 to the MM?
Btw: you're a fantastic teacher I fully agree
hi, great video, one question, you are saying the more market players the narrower the spread, because more players mean there is more room for you to negotiate how much you want to pay?
Great video firstly! However, is there not only 1 market maker per stock? If for example there were loads, would'nt things get reali confusuing as to the numbers of trades going through. Also are Market Makers decided by the company before their initial public offering?
A question do online brokers hold stock to sell to their clients and visa versa. meaning your purchase does not involve a market maker
@MarketDepth Maybe we should discuss this in the derivates video. Let me give you more information: the way to package debt is very particular. Basically, the loans are sliced in three: the best part (the first payments, less likely to default) the medium and the low. All of them are pooled with other similar pieces of debt to create a single package. When the crisis of 2008 started, trying to get a valuation of these assets was almost impossible.
Great explanation, my thanks. So if a client placed a limit sell order at 110p, would it complete, or would the price have to rise 10p until bid price is 110p and offer price 130p (assuming spread remains constant)? I.e. does the market maker always protect their margin!?
sometimes i see out of market trades? how is that possible?
and why is it that i often see the same bid and ask numbers (like 176 stocks listed for dozens of time in the book) ?
I wonder too
So, Why do people trade with market makers and not with 'No desk deal' model dealers? What are the advantages to trade with an Market maker?
Thank you for explaining market makers using fictional "SHAKES" of the stock "X42." :)
Great video! In case a market maker or a liquidity provider is needed, you can visit Finarm and find a suitable option!
Thank you sir🎉
Thank you! Content and education 👌
Great explanation thank you !
Thanks for the info
This video is fantastic - thanks for uploading!
How do market makers hedge their directional risk. Do they start out with zero shares and sell shares they don't have and then let people buy those shares later? What if large orders come in, do they take it and hope to balance it out later?
Well explained Tim, also if a share has very low trade volume the spread can get quite ridiculous.
Thanks for the video, it's very helpful. I'm a little confused about how market makers deal with the risk posed by holding securities in inventory. Is it simply reflected in the spread offered?
Explained perfectly, thanks
so is a market maker a job, occupation, title, of a specific person or just someone willing to deal in the market?
Great content.
Beautiful video
If you buy from a MM but they haven’t been able to buy any, how do they deliver the shares that they don’t have??
excellent explanation. thank you sir.
furthermore, if it is in market maker's interests to buy when the spread is larger, why not make the price go down of shares as well in order that people panic and sell? or is that what happens anyway...
any videos or book recommendation
it will really help
I am a big fan of your videos. Instead of putting them in a book, if you can put them in a DVD, I will buy it happily! Although I would appreciate if the DVD comes with more products like structured products, further elaboration on all of them (like the various bond types etc) and more examples in each video. Also if there are videos for banking processes like the back office processes, what treasury do and how it does what it does etc it would be great.
thank you thank you!
thank you so much you are very good at explaining it !
what stops market makers colluding then to keep the bid offer spread big then and "sharing" the profit?
The "spread" may be 20, but themarket maker's profit is not 20 but 10. It is 10 because the true market price is in between 100 and 120. So the actual market price is 110, but the ask price is 120, 10 profit. Likewise, the market price is 110, but the bid is 100. 10 loss for you, but 10 profit for the broker.
Correct,but you buy once and sell once, so you are loosing half the spread on each side
Hi , why do the spreads go wider after hours, and how is that calculated?
henryssurfshowcase less volume in after hours trading.
Where does MMs get their shares from? Say in a bull market no one if willing to sell their shares and there is a lot of buying power from investors. What happens when MMs sell all of their shares?
IN practice it doesn't really happen. IN a bull run the MM will start accumulating float of their own at better prices than investors. If the situation gets desperate then they may tree shake and manipulate the price action to scare people in to selling.
Great news now Federa has introduced Market Making for transacting homes
Very helpful
great explanation =)
thanks
very good tutorial. clear and simple.
Very good primer or refresher! Thanks.
of course, if you find a person who is willing to sell for £1.05, you can buy it for £1.05.
The problem is finding the person. Usually you don't know anyone, so you have to ask a broker.
The broker knows someone who sells for £1.05, so he says to you 'I can sell you for £1.15'. After all, the broker is no different to us. He is an employee working for his salary in a stock exchange company and he needs to make some money too!
Oh yeah, I forgot! A big thanks for everything! These things can't be explained better than how you have done. Fantastic.
Thank you for the video!
or is there "any" obligation to price the share correctly. Ie will a market maker (s) be punished for pushing a share price down so low that it unfairly represents the market cap? because i have seen this many times...
I feel these market makers are now complex computer programs.
Hi, have you considered this thing called the Intellitus Cash System? (go search google). My buddy says it earns people oodles of money.
thx Sir!
Could a MM just be someone flipping lots of shares?
ty
It’s a love/hate with Mr. Market Maker.
I have been trading from quite some time in share market but i learnt something today. thanks
why would takers pay a higher fee than makers? and The liquidity we talk about, is it the asset being traded or FIAT? in terms of XRP, a bridge asset for x-border payments: would liquidity there mean FIAT liquidity or XRP liquidity or both?
i need a help ooo
how can one study how to be a market maker
Follow Swaggy C on RUclips
I still don't understand how the market makers could do this profitably.
So market makers hold an inventory? Are they like dealers?
great
I don´t know why I´m thinking of Christian Bale when I see this guy!?
it's not the commisions that kils profits, it's the spread
i am so happy to meet mason Willie, who is an investment and trade specialist,with the returns on my investment each week i can say that mason is the most reliable trader in today's trading market, i am so happy
I dont really get why there needs to be a market maker. Why cant the market make its own price without a middleman?