Trading · 107 / 127 · 1 min

Market makers

Someone is paid to be the bid. When the payment ends, the bid can leave.

A worked case

A token looks easy to enter and leave. A market maker had been paid to quote it. The loan of inventory ends. The bids are gone. Holders discover the liquidity was a job, and the job finished.

The job

A market maker quotes both sides so a market looks open. They are often paid in a fee, a loan of tokens, or an option to buy tokens cheaply.

The end

The loan comes due. The option is exercised. The quotes disappear. The chart had looked liquid because they were paid to make it look liquid.

Alameda was a job

Alameda Research was a trading firm tied to FTX. It made markets. A market maker's quotes are a job with a payer: fees, inventory, a loan, an option. When the firm behind the quotes is also the venue, or is owed the inventory, the busy book is not a crowd of strangers.

Ask who pays for the bid, and what date the payment stops. A book with no answer to that is a picture.

Read it yourself

• Alameda Research

These links are the record. They are not a recommendation, and they are not instructions. A news story or a court paper can still be wrong about a detail. The check does not change because a famous name is in the story.

Apply the check

Open a question. The line is about this topic. It is not a verdict that anything is safe.

Check yourself

Write it in your own words. The course's answer opens after that. Nothing is sent.