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Lutnick Offers $20,000 Per Month to Trade on New Treasury Platform – FT

Full Article: Financial Times

The decision to offer a financial reward to market makers — the financial institutions that commit to offering prices for other investors to trade — draws on similar practices that already occur more commonly in equity and futures markets.

Comments
  • Cougar
    CougarJuly 1, 2017"I'm undecided on this (and it's not my area). The inducement is equivalent to 40MM turnover on a 5c bid-offer; across the 0-10Y curve that's a reasonable estimate and pure bid-offer so it's more like a 100MM bid-offer in the reality of where MMs trade. So 2 days P&L to get involved? Better than any other offer out there away from being a big shop. Paying 25 accounts this fee for a year makes complete sense to fulfill a virtuous circle to become a liquidity hub.…"
  • Wolfman
    WolfmanJune 30, 2017""When you see that trading is done, not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—yo…"
  • Sundown
    SundownJune 29, 2017"This headline begs the question, "Who really needs the $20,000 to be involved?". Short answer: Not the HFTs (PTFs) who are main providers of liquidity to the platform. No doubt Mr. Lutnick knows from running eSpeed that the majority of the flow in that venue is PTFs (and BrokerTec/Nex)- as much as 70% of ADV. BGC is banking on speed being the main driver of the platform which is the PTFs lifeblood. Because they are unable to source their own flow without a client fran…"
  • Goose
    GooseJune 29, 2017"Interesting experiment from Mr. Lutnick. The model has had success elsewhere. Some key differences are in equities, you have the ability to force engagement with your price due to reg NMS, and in futures there aren’t competing venues trading the same instrument. If they crush tick minimums, they could have better prices. Will that drive flow to them from real money (still thru the banks I am guessing?), who doesn’t have to be there by the letter of the law, or will it…"

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4 Comments on "Lutnick Offers $20,000 Per Month to Trade on New Treasury Platform – FT"

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Goose
Member
Interesting experiment from Mr. Lutnick. The model has had success elsewhere. Some key differences are in equities, you have the ability to force engagement with your price due to reg NMS, and in futures there aren’t competing venues trading the same instrument. If they crush tick minimums, they could have better prices. Will that drive flow to them from real money (still thru the banks I am guessing?), who doesn’t have to be there by the letter of the law, or will it just result in engaging toxic flow of other market makers. I would not doubt HL has a… Read more »
Sundown
Member
This headline begs the question, “Who really needs the $20,000 to be involved?”. Short answer: Not the HFTs (PTFs) who are main providers of liquidity to the platform. No doubt Mr. Lutnick knows from running eSpeed that the majority of the flow in that venue is PTFs (and BrokerTec/Nex)- as much as 70% of ADV. BGC is banking on speed being the main driver of the platform which is the PTFs lifeblood. Because they are unable to source their own flow without a client franchise (their own forays into the Single Dealer Platform world have been largely unsuccessful), PTFs would… Read more »
Wolfman
Member

“When you see that trading is done, not by consent, but by compulsion—when you see that in order to produce, you need to obtain permission from men who produce nothing—when you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you—when you see corruption being rewarded and honesty becoming a self-sacrifice—you may know that your society is doomed.”

Cougar
Member

I’m undecided on this (and it’s not my area). The inducement is equivalent to 40MM turnover on a 5c bid-offer; across the 0-10Y curve that’s a reasonable estimate and pure bid-offer so it’s more like a 100MM bid-offer in the reality of where MMs trade. So 2 days P&L to get involved? Better than any other offer out there away from being a big shop. Paying 25 accounts this fee for a year makes complete sense to fulfill a virtuous circle to become a liquidity hub.

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