《外汇交易实战图表与交易心理》 作 者：(新加坡)许强 (美国)Gary Weiss

Dealing with the first assumption, it is important to understand that as with any market, spreads generally tend to come in over time. Meaning that while there may have been periods, as long ago as ten years，when it was reasonable to make a 5 or even a 10 pip wide price on dollar yen to a customer, for today's market maker, this is no longer the case. In fact the spreads within the wholesale dealer markets for the major currency pairs can at this point be described as virtually non existent or for the most part no greater than one tick wide. This, of course, deflates any reasonable opportunity for most dealers to profit on the basis of width of spread alone. The idea of market intelligence as the other practical reason for being a market maker in the first place，however is another subject altogether.

For example，historically the role of a dealer was to be just that, a dealer. Meaning that they would always be available to be on the buy or sell side of a particular market at any given time. Which, of course, was one of the central roles for markets in general: to promote enough liquidity for the reasonable flow of transactions. This role, as it evolved into one of being called a market maker, had with it the implicit assumption that information derived from this order flow would (or could) be used to form the basis of that market makers own trading decisions. In today*s marketplace, this role is no less central than it has literally been for hundreds of years. TTie difference though is that now the amounts are larger (this due to the a^regation of order flow onto electronic platforms) , the trading is faster and the origin of much of the trade flow is almost impossible to discern. IronicaDy, it is also interesting to note that as the importance of market intelligence has increased among market mak  ers,this has actually had the unintended consequence of further decreasing theeven miniscule spreads that may have existed in the market at all. This is actually an important dynamicfor the average  trader to understand. In much  the  same waythat  an electronics  manufacturer is desperate to get  marketshare,  even at the riskof collapsing margins, so too has the
  dealer community, in its goal to gain market intelligence fromorder flow, actually collapsed  the spread in the foreign  exchange markets.

  With the advent of single bank electronic trading platforms, and then the further derivation of streaming prices ontomulti bank portals, the idea of capluring market share has taken a significant toll on many of the large market makers bottom line. In fact, recently, many of the larger market makingbanks in foreign exchange have started to recognize the destructive influence of this price coimpression on their profitmargins and have taken the extraordinary step of actually .trying to widen spreads (mostly though these unilateral attempts areshort lived due to market competition).So, of course, it is atthis point that one needs to ask the obvious question  Where is the attractiveness of a market makers role, or is it merely anillusion? The answer here is:1. verylittle, and2.maybe in thatorder. Meaning, that the traditional role of a market maker isactually not a particularly attractive one in today '8 market.And, maybe the whole idea of its allure is in fact just a falsehood in the first place.

Once again, it should be understood that the role of making a market in foreign exchange hasn ’ t necessarily changed over the years, meaning that even now, it is usually necessary for a market maker to quote prices regardless of the way they feel about a market at any given point in time. However, aside from having wider spreads to work with, one of the historical advantages of this role was also the idea of creating reciprocal liquidity amongst other dealers. But this is less of an issue now, due to the fact that individuals’ at a centralized dealing desk no longer do much of the market making activity, but rather this function is performed by a mechanical model, housed in a server on a rack in the banks IT area. What this means is that individual relationships that were previously formed between mutually opposing dealers, no longer matter the way they once did because price liquidity is generated without human interactioa Fur ther, the implication of this trend is even more profound in the context of trading intelligence, which is, of course, the supposed reason for now being a market maker in the first placa