Conclusion
What different traders do in order to make a market depends on the exact request from the client and the type of trader that they are. The process is generally the same, but each market making request is different even within the same financial product. The key is that traders take a risk when they make a market and thus the process they follow is meant to minimize the risk as much as possible. The bid, offer and the bid–offer spread they determine is meant to compensate them for that risk. However, most transactions are competitive and thus traders often take more risk than they would like to by providing a tighter market.
This market making analysis shows the complexity of the role of the trader and the vast amount of information ...
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