CBOE's European exchange launch came with a flood of new data, giving us a chance to review a HUGE and under-followed part of exchange strategy. Class is in session! MARKET MAKER PROGRAMS 101:
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From the MMs perspective, it's the same game theory challenge as the exchange, just flipped. Exchange incentives may cause them to trade a losing strategy just to get the rewards & come out profitable at the end of the month.
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If we see an exchange make quick changes to its MM program after a product launch, it could mean the program isn't working as intended, or they got feedback from the market & found a better strategy. Big changes in volume & revenue could follow.
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I find MM program strategy extremely fascinating, important and under-followed. If you found this interesting consider checking out my newsletter where I write about things like MM programs & other exchange topics:https://frontmonth.substack.com/
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