Most people here in this thread have absolutely no idea how MM's work. MM's are not brokers... they usually don't even have a brokerage dept. They don't make money on fees... they pay fees, just like we do (only less). They make money on the b/a spread together with very fast systems. But indeed, like @ajacobson points out... (and I pointed out in another thread) Timber Hill was never any good at market making in the true sense of the word. They possibly had quick systems, at least when they started... but they were not exactly known for their superior skills in actively trading/market making options... Most money is in trading/market making in large blocks off exchange... I hardly came across them in European markets. Which meant they didn't do that much of that... missing out on valuable info regarding flow etc. And you basically train your market makers to be computer nerds that only activate the systems and now and then adjust their params in an assertive way. Picking up the leftovers that other market makers leave behind, which pick up the bigger pieces that larger traders leave behind. They are/were basically the lowest bottom feeders. Their brokerage, or I should say their parent company IB is mainly focussed on the retail/semi-pro brokerage. Which will keep doing what they do, regardless of the closure of TH.
How could that be possible? I always thought they feed off small mom and pop retail traders through bid/ask spread, always hedged and so would profit no matter how the market behaved?
Basically just like that guy in "Margin Call": Their loss is your gain. With them gone, I DO see a drop in liquidity and a narrowing of strike price levels though.
At least we will see more money plowed into their core broker operations. Maybe some clients will benefit.
Which is what? Routing our trades? Honestly even their so called "SMART" routing algorithm is REALLY broken. I thought it's supposed to constantly work for you to route your orders according to your preference. So far, all I see is as soon as you transmitted the order, it just goes to this one exchange and that's it. If the exchange rejects it, the order just gets held somewhere. I don't see that as any different from routing an order directly to an exchange. Did they post positive earnings at least?
There is so much BS in this post... where do I begin? The other day I had an options trade go to 8 different exchanges. And your last question shows you don't really follow anything concerning IB...