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Comment by nojs | Hacker News Reader

Haha, in the heyday of Runescape it used to be possible to simply have buy and sell orders sitting in the GE for the same rare items simultaneously, and over time they’d both get filled for a profit. I guess you would call it “market making”.

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I used to wake up before school, dump my entire stack of gold on the GE for bones (just the regular ones) at a few gp below average price. By the end of the day the order would usually be fulfilled. Then I'd dump them back on the market at a few gp above average price and it would be fulfilled by the morning.

Most days it would net me a small profit, ocasionally prices would fall slightly throughout the day and I'd lose a little, but equally some days it would rise and I'd make extra.

You needed an FPGA to pull your orders on underlying price moves /s

How could you lose money on a standing sell order for a higher price than what you bought it for?

lots of video games charge a fee of in game currency for a transaction through an auction house or other system. It acts like a sink against inflation in the video game economy

RuneScape did not, and did have massive inflation, to the point that some players would have trouble keeping their wealth in gold coins due to hitting the signed integer limit.

If the market moves down after you bought, you are stuck holding the bag. You can either a) sell for a loss, or b) keep your item, and be unable to make further trades until the price (maybe?) recovers. Remember that OP put his entire stack into this, so he can't run the spread while his item isn't selling.

You can have unrealized losses since it's possible that the value of your items is less than the value of the goods you paid to receive them. To repeat this strategy the next day, you need to convert your items back into gold and realize the loss (or just introduce more gold via other means).

This is indeed how market making works.

This is actually kind of how the US market works with essentially 1 market maker who is by far the largest and who also happens to be the largest political donor (100 million a year to gop alone). Oh, and like Bernie Madoff, the owner of that market maker also owns a hedge fund (which like Bernie's makes completely impossible profits year after year). The hedge fund is of course a totally seperately run business from the market maker /s /s /s

So that actually sounds quite realistic to me from the market maker point of view of how things actually work in the US.

This is actually how markets are made - do you think a second hand book shop operates any differently?

Second hand book stores take people's money and then give them nothing in return? I'm referring to naked shorting and failing to deliver perpetually.

Sorry, I fail to see the analogy.

Analogy was between market making (buying and selling the item in Runescape with a spread) and second hand book sellers (having a buy/sell price that's not equal to each other for a second hand book). Citadel Securities does not do naked shorting and does not fail to deliver - they make markets by taking position both on long and short side of the market with a spread in between. Some of the short positions they take may not have an immediate backing - but they make up for that by offering more more and attractive prices for bids making up the shortfall within a matter of milliseconds.

You appear to be referencing Jeff Yass and Susquehanna International Group. Why are you being cagey about saying so? Their hedge fund has had losing years, whereas, as far as I recall, Madoff never reported a loss. On what information are you basing your claims?

They're referring to Ken Griffin / Citadel (Securities). Not that it makes their claims any less silly in terms of fundamentally misunderstanding how markets work.

What claim about how the market works is silly exactly and why?

My claim was that 1 person owns the 1 major US market making business AND a hedge fund. Facts: they can control the price (naked shorting + strategic FTDs) and trade on it. Even if they can't/don't control the price, they can still front run the entire market. And even if they don't do that bEcaUsE iT's iLliGaL they legally (not ethically) do it through PFOF from Robin Hood among others.

They do all of that and way more. Just look up the continuous massive FINRA and SEC violations and the (tiny) fines they pay for it.

But I'm sure all is fine and dandy. I find it mind blowing why anybody would defend the biggest crook since Madoff.

You should be happy that market makers like Citadel Securities exist. Payment for order flow is why commission free trading can exist. Citadel Securities, Virtu, Hudson River Trading, Jump Trading etc compete in a negative sum game which reduces the bid ask spread on various assets (i.e. make them cheaper to trade for everyone).

Also lol that a hedge fund with about 1% of total hedge fund assets controls prices. What do you think the other hedge funds and trading firms are doing?

Presumably (s/he thinks) the other hedge funds are not also market makers.

Actually, this could all be done with a blockchain bid and ask trading system that would match all bids and asks and execute without Yass and Griffin and Mercer. If Susquehanna and Citadel and Renaissance want to do it then every transaction should be taxed on a scale and the money used to pay down the national debt, or into next gen energy infrastructure. These guys are buying yachts, Lamborghinis, and elections.

> they can control the price (naked shorting + strategic FTDs) and trade on it

This is the bit that seems poorly substantiated and unlikely. Please elaborate. Anything evidence you can cite would be helpful.

Also, Citadel’s HF has definitely had down years.

I understand. I found it mind blowing and unbelievable too at first. I can recommend this book:

Naked, Short and Greedy: Wall Street's Failure to Deliver (2020)

Susanne Trimbath

It's full of examples and evidence from someone who has worked at the SEC.

Yass, Griffin and Mercer cannot lose. They make a profit on every transaction on a listed exchange whenever they want, using inventory or front running bids and asks w faster computers than the rest of us have. They also do naked shorting and spoofing on bids and asks- disingenuous large blocks that are entered to start a stampede and then pulled after the carnage. They are crook billionaires and that's all they are. They don't want to be regulated or taxed, and that's why they're trying to buy the election. They are evil.....

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