Latest news with #marketmakers
Yahoo
3 days ago
- Business
- Yahoo
Quant Traders That Dominate US Options Market Move in on Europe
(Bloomberg) -- The option market makers that dominate US trading are taking a bigger share of volume in Europe. Billionaire Steve Cohen Wants NY to Expand Taxpayer-Backed Ferry Now With Colorful Blocks, Tirana's Pyramid Represents a Changing Albania Where the Wild Children's Museums Are The Economic Benefits of Paying Workers to Move NYC Congestion Toll Brings In $216 Million in First Four Months While the tariff-driven market turmoil in April boosted trading on both sides of the Atlantic, Europe remains far behind. Even with talks about the end of 'US Exceptionalism' and investment flows directed away from the country, Europe lacks the abundant retail demand that drives a robust, relatively transparent options market in the US. But despite the differences, in both places market makers are pushing in to service customers directly. More nimble, with more sophisticated quant models than traditional banks and comfortable hedging across markets, they already held 30% of the open interest in Euro Stoxx 50 Index listed options on Eurex in 2022, an Acuiti report found at the time. Their share is estimated to have grown further since then. 'Market makers have long been dominant players in the US options market, consistently making up the top three participants by volume,' said Josh Ward, an equity-derivatives salesman at Susquehanna International Group. 'This trend is now emerging in Europe.' While market makers have historically maintained a strong presence on screen, they're increasingly capturing share in off-screen volumes in Europe. Also known as principal trading firms, they're making up two of the top three participants in block trades on Eurex so far this year, Ward said. 'Principal trading firms now have very established relationships with the buy-side,' said Piebe Teeboom, secretary general of the European Principal Traders Association. 'Within the options space, the trend of buy-side firms seeking out PTFs on off-screen blocks is only likely to increase given how competitive those firms are on pricing.' It raises the question of how much the presence of quant firms can encourage more overall volume in Europe, especially from the smaller, non-institutional traders that have driven US growth. But they still face challenges in the region. A big one is the frequency of late cross trades that aren't initially visible to the wider market — where a placeholder is made at 6 p.m. UK time and the price is disclosed at 10 p.m. That reflects, at least in part, traders' concerns about information leaking out. The intensifying competition in Europe is a boon for buy-side clients, who despite stagnant volumes are able to trade big option blocks on index and single stocks. On any given day, several billion euros in notional value could be sourced on Euro Stoxx 50 options in a single ticket. 'The rise of dedicated market makers is a net positive for investors as it leads to more competitive pricing across asset classes, which our clients ultimately benefit from as end investors,' said Stefano Amato, senior fund manager at M&G Investments. 'It's also prompting banks to become more competitive and/or focus on certain segments where they have a particular strength, which again in aggregate contributes to bringing down the overall cost of trading for market participants.' While the European market has become increasingly competitive, some buy-side firms view the relationship with banks holistically: They're working with them across other asset classes, hence keeping a big portion of the equity-derivatives business with them. But daily options flow has always been highly commoditized and price sensitive, so even the most loyal clients may shift more orders to the market makers. Some market participants have noted that option auctions are at times so competitive that pricing becomes inverted, with some market makers willing to offer below the bid in order to win the business. 'We attribute the expanding footprint of market makers' direct client trading desks to their ability and willingness to consistently quote tighter spreads and larger sizes for their clients,' said Ward. 'Their conviction to do this is supported by significant resources, including advanced technology, balance sheet capital, specialist back-end infrastructure and larger, more experienced trading teams dedicated to their respective areas of market expertise.' The shift in options flow to firms like Optiver and Susquehanna is an extension of a gradual trend since the Great Financial Crisis of some banks focusing on more profitable businesses such as Quantitative Investment Strategies and light exotics. While they compete with market makers for buy-side clients, they still work together to offset risk. 'We continue to work closely with banks and see our role as complementary to the services they provide to their clients and to us,' said Edward Monrad, head of corporate strategy for EMEA at Optiver. 'There's still plenty of room for growth as well.' 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Bloomberg
3 days ago
- Business
- Bloomberg
Quant Traders That Dominate US Options Market Move in on Europe
The option market makers that dominate US trading are taking a bigger share of volume in Europe. While the tariff-driven market turmoil in April boosted trading on both sides of the Atlantic, Europe remains far behind. Even with talks about the end of 'US Exceptionalism' and investment flows directed away from the country, Europe lacks the abundant retail demand that drives a robust, relatively transparent options market in the US.
Yahoo
18-05-2025
- Business
- Yahoo
Movement Labs and Mantra Scandal Are Shaking up Crypto Market-Making
Two of the year's most chaotic token blowups — Movement Labs' MOVE scandal and the collapse of Mantra's OM — are sending shockwaves through crypto's market-making businesses."These scandals have definitely changed trust dynamics between market makers and project teams, where trust is no longer assumed—it's engineered," Zahreddine Touag, Head of Trading at Woorton, said over a Telegram message on Friday. "Market makers -- especially those providing balance sheet-intensive support -- will now insist on full disclosure of side agreements, token grants, and any preferential economic rights," Touag added. In both cases, rapid price crashes revealed hidden actors, questionable token unlocks, and alleged side agreements that blinded market participants, with OM falling more than 90% within hours late April on no apparent catalyst. Unlike traditional finance, where market makers provide orderly bid-ask spreads on regulated venues, crypto market makers often operate more like high-stakes trading desks. They're not just quoting prices; they're negotiating pre-launch token allocations, accepting lockups, structuring liquidity for centralized exchanges, and sometimes taking equity or advisory stakes. The result is a murky space where liquidity provision is entangled with private deals, tokenomics, and often, insider politics. A CoinDesk exposé in late April showed how some Movement Labs executives colluded with their own market maker to dump $38 million worth of MOVE in the open market. Now, some firms are questioning whether they've been too casual in trusting counterparties. How do you hedge a position when token unlock schedules are opaque? What happens when handshake deals quietly override DAO proposals? 'Our approach now includes more extensive preliminary discussions and educational sessions with project teams to ensure they thoroughly understand market-making mechanics,' Hong Kong-based Metalpha's market-making division told CoinDesk in an interview. 'Our deal structures have evolved to emphasize long-term strategic alignment over short-term performance metrics, incorporating specific safeguards against unethical behavior such as excessive token dumping and artificial trading volume," it said. Behind the scenes, conversations are intensifying. Deal terms are being scrutinized more carefully. Some liquidity desks are reevaluating how they underwrite token risk. "Recent developments have prompted a recalibration—not a reinvention—of how B2C2 assesses counterparty risk in our market-making," Dean Sovolos, Chief Legal Officer at B2C2, told CoinDesk in a Telegram message. "Historically, when I first joined B2C2 in 2021, much of the crypto market operated on a blend of informal trust and aggressive risk appetite. That paradigm has shifted, especially of late. Post-Q1, B2C2 is seeing a marked pivot toward institutional-grade rigor: enhanced legal diligence, enforceable tokenomics terms, and clear contingency frameworks for breaches or deviations from disclosed unlock schedules," he said."The Movement and Mantra incidents didn't create new risks—they revealed how latent those risks remain in poorly governed token ecosystems. We're responding with stronger contract architecture, but also better integration between legal terms and technical enforcement mechanisms," Sovolos stated. Others are demanding stricter transparency — or walking away from murky projects altogether. 'Projects no longer accept prestigious reputations at face value, having witnessed how even established players can exploit shadow allocations or engage in detrimental token selling practices,' Metalpha's head of Web3 ecosystem Max Sun noted. 'The era of presumptive trust has concluded,' he claimed. Beneath the polished surface of token launch announcements and market-making agreements lies another layer of crypto finance — the secondary OTC market, where locked tokens quietly change hands well before vesting cliffs hit the public eye. These under-the-table deals, often struck between early backers, funds, and syndicates, are now distorting supply dynamics and skewing price discovery, some traders say. And for market makers tasked with providing orderly liquidity, they're becoming an increasingly opaque and dangerous variable. 'The secondary OTC market has changed the dynamics of the industry,' said Min Jung, analyst at Presto Research, which runs a market-making unit. 'If you look at tokens with suspicious price action — like $LAYER, $OM, $MOVE, and others — they're often the ones most actively traded on the secondary OTC market.' 'The entire supply and vesting schedule has become distorted because of these off-market deals, and for liquid funds, the real challenge is figuring out when supply is actually unlocking,' Jung added. In a market where price is fiction and supply is negotiated in back rooms, the real risk isn't volatility for traders — it is believing the float is what the whitepaper and founders say it is. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
