A Story about Large Block Trading
In June 2003, I was an ETF liquidity provider on the Bear Stearns derivatives trading desk. In that business, we were providing liquidity in ETFs to the firm’s institutional clients. Most users of ETFs at that time were hedge funds using them to hedge their portfolios or play intraday volatility. We had developed what seemed at that time to be a forward-thinking system in which we could utilize basket trading to trade all the underlying components of an ETF in the proper sizes. We could also trade futures (if they existed for that particular underlying index) and consolidate all the implied positions to give us a clear picture of our risk in real time. This enabled us to make some large markets very quickly, ...
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