Thursday, September 10, 2009

How long to hold a position - eq der sell-side trader

In facilitation (match-maker??), a bank trader doesn't need to hold position. Client makes the request. Trader finds a quote from the market and marks up, then makes a 2-leg trade. Same as TMC virtual trades. Not sure how widespread this practice is. For listed instrument, client probably gets the exact listed price, but pays a commission to the broker. In FX spot trading, some say there's no commission -- brokers mark up the upstream bid/ask and profit from the wider spread. However, I believe many FX ECN's do charge commission. Their business model is price transparency, never-hold-position, pure MATCH-maker, never MARKET-maker.

If the deal is tailor made for a client, then the trader may have to be the counter party and therefore hold the position for the full life time of the deal.

Prop traders? no "client request". Can hold very long.

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