Where market making meets market microstructure

A talk at the International Association of Quantitative Finance (IAQF) seminar on 2/14/23

[@pmuthuvivek7]

Easily the best content out on KZbin with respect to Market Making. Please do post more content. Thanks

[@sstoikov]

good to hear! any asset classes or topics that you find most interesting within market making?

[@pmuthuvivek7]

Nothing in particular. But please do post videos related to market making whenever ypu find time. Thanks

[@AchillesFleece]

@@sstoikovcan you talk about how to efficiently do market making for projects that are discovering price? New projects that are getting listed? Market making on DEX pools without order books

[@kyuss0x1]

@@sstoikov how about market making in not liquid markets ?

[@bgvianyc]

If John Malkovich was an expert on market making…

[@sstoikov]

Some code to get started with the microprice is available here: github.com/sstoikov/microprice

[@proptrader8810]

Can't believe that I can see Sasha Stoikov's lecture on KZbin. Appreciate So Much

[@bibbidi_bobbidi_bacons]

I thought I was dumb before I watched this. Can confirm am incredibly dumber than previously perceived… 😞 how do idiots like me make money in the markets…..

[@aayushmahajan3749]

Hi sir , have been market making in Crypto since 2 years now , and this lecture is really insightful , people often rely on funny chart patterns but it is the order book where the real signals are created. Any more papers or content on Market Making as a subject would be great

[@王士豪-v5g]

Awesome speech! The part that compares the mid-price to VAMP is impressive

[@sstoikov]

cool and thanks for the feedback. VAMP seems particularly useful for crypto market making

[@vehctor8893]

This is wonderful!

[@PplsChampion]

VAMP seems very similar to what another MM on youtube called Global Average Symmetric Price (GASP) but the other guy did not reveal the details [claimed was trying to patent the idea]

[@sstoikov]

good luck patenting a trading idea ;)

[@bavandeep4683]

Do you think tracking the VPIN would be helpful as a warning signal before massive price drops?

[@sstoikov]

VPIN has multiple definitions here: www.quantresearch.org/VPIN.pdf which one did you have in mind?

[@bavandeep4683]

@@sstoikov I think I meant the high frequency estimate one given on page number 4, apparently it was able to predict the 2010 flash crash an hour before it happened, forgive me if I'm missing something obvious here I'm fairly new to market making literature

[@cardosofede]

Hummingbot + Sasha Stoikov = 🙌🚀

[@sstoikov]

Haha, maybe you could call the next version the Stoikov algorithm

[@cardosofede]

@@sstoikov haha let’s add it 🚀

[@snay6869]

your research paper is fucking litttt

[@sstoikov]

thanks! which one? I have a few more here: papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1121907

[@snay6869]

@@sstoikov lol i am going to read all of them now, do you actively market make?

[@snay6869]

@@sstoikov I’m an order flow discretionary trader actually, still in my young days. Wanted to learn things from you, be it from your papers. Is there anywhere we could chat?

[@sstoikov]

@@snay6869 sure look me up on LinkedIn

[@snay6869]

@@sstoikov sent!

[@luisleao5323]

gold content

[@bck4107]

🔥🔥🔥

[@mathgeeks3598]

So great, how can I get the py file or example code shown in the slides?

[@lorenzourera4223]

+1 This would be nice

[@sstoikov]

github.com/sstoikov/microprice

[@sstoikov]

@@lorenzourera4223 github.com/sstoikov/microprice

[@Ibleesx]

Hey did you know that they didn't even implement the Avel Stoi paper equations correctly

[@dehbialaouibechir5919]

What makes you say this ? If that’s the case, do you know if it’s corrected now ?

[@sstoikov]

When you implement papers in code, you often have to make some engineering adjustments

[@Ibleesx]

@@sstoikovTaking out a factor of sigma from the expression seems too big of an engineering adjustment. This is directly from their source code: _reservation_price = price - (q * self.gamma * vol * time_left_fraction) here vol should be vol^2

[@sstoikov]

@@Ibleesx yes I saw that, but since the model assumes constant volatility, I don't view that as a big problem. You could even absorb the whole gamma*vol*time into a single parameter

[@Ibleesx]

@@sstoikov Right your model assumes constant volatility, but in humming bot it looks like people are using volatility calculated from a small trailing window, a la "InstantVolatilityIndicator". Although, you are right that it probably doesn't matter that much, since IMO it SHOULD be a constant (or at least more stationary than a short trailing window), so the trader can then adjust gamma to fit their risk preferences.

[@sakjdh]

Any ICT traders here?

[@discordraburg9988]

does ict claim he makes markets, with his enigma? i dont get it

[@sakjdh]

@@discordraburg9988 no, but he gives a practical understanding on how non market makers can engage into market knowing what market makers are most likely to do. You get it now?

[@ArchimedeanEye]

ICT traders have some good insights but you got to be a real dummy to believe MJH created the algo