Tell me you've never been in market making business without telling me you've never been in market making business. @HideNotSlidepic.twitter.com/tYFm6No1OS
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Think about the mechanics of collecting the bid-ask spread, it's not risk free....and the order flow allows them to better model the risk & know when to provide more or less liquidity.
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Does it though? Is retail order flow really both a great thing to execute against *and* an information advantage? Guess every little marginal thing helps a bit? (Not rhetorical questions. I'm just an idiot asking questions.)
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Have you looked at the public disclosures of any wholesaler with regard to stop loss orders for example? That's an easy place to start...
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simplest example: lit price discovery in smth like GME or AMC is much less relevant than predictable changes in the direction of aggregate retail flow, and the latter is a private data source for the wholesaler
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How can you argue that seeing 30% of the flow in a name privately (60% OTC trading, primarily controlled by 2 firms), plus being a top on-exchange market maker, doesn't confer an information advantage?
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"MMs hedge away directional market exposure" - why only hedge, when you can bet on retail flow direction. Much more profitable on trending markets than collecting spreads
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