07.29.2011
By Terry Flanagan

Market Making Technology Expands

The need for market makers to operate in a fully automated environment has called for new technology specifically geared to their needs, which includes being active on multiple trading venues.

Orc Group, for example, has released a high-performance market making product that enables market makers to provide low-latency quoting and to efficiently reach multiple markets.

“Market makers need both a low-latency trading application as well as one that has been designed to be co-located at the exchange,” Markus Kämpe, senior product manager at Orc, told Markets Media.

Although electronic market making is a subset of high-frequency trading, the two are not synonymous.

“Market making is a type of high-frequency trading, but not all HFT is market making,” said Kämpe. “Market making is about providing liquidity in the market; it typically relies on being fast to respond to changes in market conditions. HFT encompasses many different trading strategies, of which market making is one.”

Orc Market Maker is designed for electronic options market makers and is a trading application that manages a market makers quoting in the market while also providing automated and manual tools for trading on the market.

“It’s ideally suited for those looking for an out-of-the-box product that gives them flexibility to control their market making and trading, but that does not require writing their own trading strategies or market making logic,” Kämpe said.

Orc Market Maker is best used by options market makers and traders around the world that are using a market making trading style. It’s also used by liquidity providers in structured products in Europe and Asia. In this first release, it is intended for options on futures market makers on the Globex platform (CME/NYMEX).

Market makers need the ability to grow their business and make markets on multiple exchanges quickly and easily. “They want the core trading logic to be set, but with enough flexibility built in that they can change their quoting based on the market conditions and for the specific needs of the market and instrument that they are quoting on,” said Kämpe. “Orc Market Maker gives them pre-built advanced trading logic, but with the flexibility to control their volatility analytics and trading behavior to meet their specific requirements.”

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