Market Making on BSE

cclay · #1 3rd June 2008, 04:49 AM

I am looking for general information on the regs/rules to be a market maker on the BSE. I am a market maker in options on the New York Stock exchange and would like to expand my market making firm to India. Any information, no matter had basic, would be much appreciated.

musicjunkie · #2 3rd June 2008, 09:02 PM

hello,
Could we have details on how one can become a market maker and what firms in India operate similar to yours in NY?
MJ

skarpio · #3 3rd June 2008, 09:12 PM

If you haven't already gone through this on wikipedia:

Code:

A market maker is a firm who quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread.

more...

masterjee · #4 3rd June 2008, 10:44 PM

Quote:

Originally Posted by skarpio

If you haven't already gone through this on wikipedia:

Code:

A market maker is a firm who quotes both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread.

more...

Both NSE and BSE are order driven exchanges - there is no concept of market maker. Anyone can give buy sell quotes - just meet the margin requirements - position size is subject to overall position limits in individual stocks as notified from time to time.

Foreign money/nationals will have to come in through specified routes - FII, P-notes, offshore companies. Lots of ways to come in - some international brokerage houses may help.

regards

m

cclay · #5 4th June 2008, 05:11 AM

Thanks for all the responses. Currently on all exchanges in the USA only market makers can simultaneously send a bid and an offer in an option series and market makers must be approved by the exchanges. I use Merill Lynch for all my clearing, and I am looking into whether or not they will be offering clearing services in India.
I used to trade for a global market making firm called Timber Hill, and I know they are just beginning to make markets in India.
Do you know of any contacts/companies who could assist me in getting my orders there?

skarpio · #6 5th June 2008, 09:55 AM

Quote:

Originally Posted by masterjee

Both NSE and BSE are order driven exchanges - there is no concept of market maker. Anyone can give buy sell quotes - just meet the margin requirements - position size is subject to overall position limits in individual stocks as notified from time to time.

Foreign money/nationals will have to come in through specified routes - FII, P-notes, offshore companies. Lots of ways to come in - some international brokerage houses may help.

regards

m

That was a reply for mj. Anyway, take a look here and let me know, if these market-makers are the same as the brokers. I am curious.

Thanks for your explanation, though.

moneygurukul · #7 5th June 2008, 02:32 PM

Quote:

Originally Posted by skarpio

That was a reply for mj. Anyway, take a look here and let me know, if these market-makers are the same as the brokers. I am curious.

Thanks for your explanation, though.

Market maker is a person whose responsibility is to main a liquid market. To do this, a market maker provides bid price to a seller and a offer price to a buyer. In effect, the traders trade with market maker instead of trading with each other.

A broker is a person who executes a trader's trade as agent of the trader.

Both are different entities. However, there is no concept of market making in Indian bourses. The computerized order matching system allows traders to trade with other traders thus dispensing with the need of an intermediary called market maker.

skarpio · #8 5th June 2008, 07:23 PM

So what did you make of the news article whose link I posted?

cclay · #9 10th June 2008, 08:09 AM

Thanks for the article link. Clearly, the BSE is trying to recruit more market makers to its exchange as evidenced by the incentives. The fact that they require a certain number of quotes on a continual basis leads me to believe that a difference DOES exist between a trader and an actual market maker. On my exchange (NYSE) as a market maker I am required to send a continuous bid and offer in all series except the LEAPS (options expiring in 2010) 60% of the time. A Lead Market Maker on the NYE is required to send quotes 98% of the time in all series. So, it seems the BSE will slowly move toward a similar standard - makes sense as an exchange needs continual liquidity to grow trading volume.
I'm still trying to research how I could become a MM on the BSE. I emailed an official at the BSE but haven't heard back. Anyone work at an investment bank or clearing house in India??

masterjee · #10 10th June 2008, 09:29 AM

90% of the market for Futures and options in India is in NSE and not in BSE. If I am not wrong the ratio of trades and value is skewed in favor of NSE by a 90 to 10 margin. BSE is trying to catch up with various means - such as the one you are refering to, as well as others such as mini contracts etc. . For various historical reasons BSE is not the preferred exchange for most people. (except for arbitrage purposes).

BTW I did not find any elaboration of the market maker news in the BSE site .. but they are giving out limited memeberhips for derivatives. I guess a market maker must first be limited member..

regards
m