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Comment by lordnacho | Hacker News Reader

I actually traded with these guys. Not personally but definitely through agents.

It's interesting to note that whenever there was a fixing of any kind in a visible market like fx or equities, people who held dependent instruments such as options would always comment on how it seemed fixed.

You'd stare at the graph during the fixing and wonder why on earth it was moving so strangely. They'd typically be rumours of someone having a large interest via barriers and such but of course your broker would not actually tell you who.

I'm not surprised libor was also rigged, it actually seems to suit the culture. Add to that the fact a lot of these guys (these types of traders and brokers, not necessarily these exact guys) knew each other from childhood, or at least had a very strong common culture.

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> your broker would not actually tell you who

Former algorithmic options market maker. Brokers don't tell because they don't know. (We did, along with the one broker whose client placed the order did.)

Former broker.

We know, but it is important function of a broker not to tell.

I used to trade voice before I went full algo. They know, and they go for drinks with them after work. They're supposed to not tell you because the whole point of them is to be the go-between, so that it's not too obvious what they want to do.

That sort of broking is a lot smaller now, and there is something to be said for the screen model of market making.

Each broker goes for drinks with their clients, and knows what their client trades. But they can rarely connect the dots without the help of a market maker. Hence why I got drinks :)

In my experience they do know. Not every broker, not every trade you might ask about. Still even if your broker doesn't know, if there's enough guys on your trade floor someone is going to be able to call or message someone who does know. No going out for drinks needed, fuck that.

Can you answer this question then? It is about mysterious implied volatility changes in options contracts that correspond with no matched orders.

http://quant.stackexchange.com/questions/3753/what-really-dr...

The first answer is correct. You have a vol surface, and adjacent contracts are similar, so you can take the information from other contracts to re-mark your book, giving you the prices of things that haven't traded.

If BMWs go up in price, Audis can go up in price as well, even though you've only observed people buying BMWs. Same goes with the general market, if people are buying Toyotas and Fords, you can guess the prices of Mercs are higher too, despite not having seen one.

One thing to note is there are sometimes shenanigans going on in the options markets. The settlement prices of options determine the margining and sometimes the end-of-month PnL reported by the administrator. If a trader has a large position in an option, he might be able to cause the guy at the exchange to move the marks a little in his favour. I've sat next to guys who've phoned the exchange and hounded them to move the mark a little. No brown envelopes and such, and the relationship is not like with a broker whom you've met.

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