undefined | Better HN

0 pointshackerlight3y ago0 comments

"Order flow toxicity is the measure of a trader's exposure to the risk that counterparties possess private information or other informational advantages."

Usually, flow from other MMs isn't toxic.

Toxic flow can also just be someone who's executing a very large order, even if that counterparty isn't informed. If you fill them as they are starting to work their order, you could get run over as they continue to finish that order and push the price against you.

0 comments

smabie3y ago

Flow from other HFT / market makers is often very toxic. They are playing the exact the game as you.

hchz3y ago

Right, sure, and that game is not lifting the market, generally speaking.

twic3y ago

Other market makers are often moving away from something they've seen but you haven't yet. When whatever that is hits you, the fills you got from the other market maker will look really bad.

1 more reply

smabie3y ago

Not aware of a market maker that also doesn't take liquidity as well. In fact, it probably would impossible to market make without also taking (you wouldn't be able to provide liquidity if your quotes were in cross with the market).

That said market makers do a lot more making than taking.

j / k navigate · click thread line to collapse

0 pointshackerlight3y ago0 comments

"Order flow toxicity is the measure of a trader's exposure to the risk that counterparties possess private information or other informational advantages."

Usually, flow from other MMs isn't toxic.

0 comments

smabie3y ago

Flow from other HFT / market makers is often very toxic. They are playing the exact the game as you.

hchz3y ago

Right, sure, and that game is not lifting the market, generally speaking.

twic3y ago

Other market makers are often moving away from something they've seen but you haven't yet. When whatever that is hits you, the fills you got from the other market maker will look really bad.

1 more reply

smabie3y ago

That said market makers do a lot more making than taking.

j / k navigate · click thread line to collapse