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I've searched, but found no literature on market making in single tick markets. I'd appreciate any references.

Given that most literature on MM assumes micro-structure is mean-reverting due to the bid-ask bounce, none of this applies in the case of a single tick market since the 'mean-reversion' is a single tick.

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    $\begingroup$ Do you mean tight spread by one ticker market? bid-ask bounce is present there as well, so maybe worth explaining what you mean. $\endgroup$ – LazyCat Mar 27 at 14:38
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    $\begingroup$ by definition on a futures exchange a 'tick' is the smallest possible (allowed) price increment so commonly, or potentially, all contracts can create single tick markets if the offer is one tick above the bid?? $\endgroup$ – Attack68 Mar 27 at 18:05
  • $\begingroup$ @LazyCat By one-tick market, I mean the spread is 99% of the time a single tick. There is indeed bid-ask bounce, but I'd hardly call that 'mean reverting' in the sense most of the literature on MM addresses $\endgroup$ – wildbunny Mar 27 at 19:24
  • $\begingroup$ I believe, people usually call it tight spread (stocks or other instruments). Historically, academics studies didn't have the access to the limit order book and were tracking the price of the instrument using trade prices. These experience bid-ask bounce no matter what the spread is. More recently people started to use mid-price, which is much more stable. There is also a decent number of papers on the inventory risk. Perhaps, you can start here: quant.stackexchange.com/questions/8897/… $\endgroup$ – LazyCat Mar 28 at 1:50
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    $\begingroup$ No, there are differences in MM between tight spread and wide spread instruments, but a) they have little to do with bid-ask bounce b) most academic research is applicable to both cases $\endgroup$ – LazyCat Mar 28 at 12:25

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