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I am trying to identify markets makers within an (options-)orderbook. Of course, this is far stretched, but I was wondering what kind of characteristics / patterns I should look at. I got the following sofar:

  • likely, but not necessarily best bid and best offer
  • symmetry; a similar amount of contracts bid and offered. This can change due to delay in "reloading"
  • changing quote as underlying price/fair value changes
  • more likely to quote on odd ticks than round numbers

Below is an example of the orderbook I will be looking at. This represents all the information available

enter image description here

What are additional things I can look at? Thanks in advance,

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  • $\begingroup$ You may find that there are market makers who aren't posting liquidity in the book. Keep in mind retail rebate arrangements allow for option market makers to have first look at order flow before routing to an exchange. $\endgroup$ – Kch May 23 at 17:23
  • $\begingroup$ I am curious why you are interested to identify market makers $\endgroup$ – dm63 Jul 11 at 12:53
  • $\begingroup$ I want to recreate their greeks book $\endgroup$ – HJA24 Jul 11 at 16:01
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You could also look at how each price level is made up.

For example how is the 18 lot on the bid price 0.0995 collated. Is it a 5 lots, 5 lots, 7 lots and 1 lot. You can do this on certain exchanges as they have an enhanced order book where you can see every insert, modification, delete and trade. This may require you to recreate the order book, which requires some decent coding knowledge.

When you understand how each level is made up on a more granular level, you can then compare this versus exchange liquidity provider requirements. The exchange may require that MM's have to quote X number of strikes in at least 7 lots during the trading day. Hence, inferring the 7 lots may be a MM if seen across a number of strikes.

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  • $\begingroup$ Thanks for thinking about this! Agree with your plan. However, as stated, I have some limitations; I only see the total number of contracts per price. So your answer is not possible to implement $\endgroup$ – HJA24 Jul 11 at 16:01

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