Minor nit: market makers typically aren’t there to speculate, they’re there to provide liquidity and make small profits per trade doing so. Most market makers try their best to trade down to no position overnight, since they don’t want to be long or short in anything.
Thanks! Maybe the market maker I worked for was atypical. We definitely had opinions on where the market was going and made good money from that, especially in times of high volatility.
It's hard to make money by pure market-making, so it's common for market-makers to also do some amount of speculation.
After 2008, banks were banned from speculating (ish) [1], but were allowed to do market-making. It's common for market-making desks to do speculative trades under cover of market-making activity. It's hard to conclusively prove that any given trade is speculation rather than market-making (which involves hedging), so they generally get away with it.
Ah, yes. We were purely a proprietary trading firm. As my boss explained it, the traders who started the company brought a pile of money with them, and it was our job to make it a bigger pile of money. It was in some ways very pure; for my first year there we didn't even have the company name on the door. We already knew where the place was, and money spent on frivolities just meant less money to trade with.
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