Stories with Tag Trading

• Making Markets on Kalshi

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  Posted: 2025-02-17 00:26:04

  Verbose tl;dr

  The blog post details the author's experience market making on Kalshi, a prediction market platform. They outline their automated strategy, which involves setting bid and ask prices around a predicted probability, adjusting spreads based on liquidity and event volatility. The author focuses on "Will the Fed cut interest rates before 2024?", highlighting the challenges of predicting this complex event and managing risk. Despite facing difficulties like thin markets and the need for continuous model refinement, they achieved a small profit, demonstrating the potential, albeit challenging, nature of algorithmic market making on these platforms. The post emphasizes the importance of careful risk management, constant monitoring, and adapting to market conditions.

  Roberto Lafuente's blog post, "Making Markets on Kalshi," delves into his experiences and strategies employed while acting as a market maker on Kalshi, a prediction market platform specializing in event contracts. He begins by elucidating the fundamental mechanics of Kalshi, explaining how users can trade binary contracts that resolve to either yes or no based on the outcome of real-world events. He emphasizes the importance of understanding the underlying probabilities of these events to make informed trading decisions.

  Lafuente then proceeds to detail his personal approach to market making on the platform. This involves actively providing both buy and sell orders for contracts, aiming to profit from the spread between these bids and asks. He highlights the necessity of managing risk effectively in this process, particularly given the inherent uncertainty in predicting future events. He elaborates on the concept of "adverse selection," where traders with superior information can exploit market makers, and discusses methods to mitigate this risk, such as setting appropriate bid-ask spreads and adjusting positions based on market dynamics.

  A key element of Lafuente's strategy involves utilizing external data sources and prediction models to inform his pricing decisions. He explains how he incorporates information from various sources, including prediction markets like PredictIt and Metaculus, as well as other publicly available data, to refine his assessment of event probabilities. He further discusses the challenges of incorporating this information efficiently and adapting to rapidly changing market conditions.

  Lafuente also touches upon the technical aspects of interacting with the Kalshi API, detailing the process of automating his trading strategies. He outlines the advantages of algorithmic trading in allowing for rapid responses to market fluctuations and maintaining a consistent presence in the market. He provides a glimpse into the complexities of designing and implementing such automated systems, including considerations for order placement, risk management, and data processing.

  Finally, Lafuente reflects on his overall experience with market making on Kalshi, noting both the challenges and rewards. He acknowledges the inherent risks involved in predicting future events and the importance of continuous learning and adaptation. He concludes by offering insights into the evolving landscape of prediction markets and the potential opportunities they present for individuals interested in engaging with this unique form of financial activity.

  • Kalshi
  • Market Making
  • Prediction Markets
  • Trading
  • finance
  • Investing
  • Derivatives
  • risk management
  • Event Contracts
  • Speculation
  • probability
  • forecasting

  Summary of Comments ( 8 )
  https://news.ycombinator.com/item?id=43073377

  Verbose tl;dr

  HN commenters discuss the intricacies and challenges of market making on Kalshi, particularly regarding the platform's fee structure. Some highlight the difficulty of profiting given the 0.5% fee per trade and the need for substantial volume to overcome it. Others point out that Kalshi contracts are generally illiquid, making sustained profitability challenging even without fees. The discussion touches on the complexities of predicting probabilities and the potential for exploitation by insiders with privileged information. Some users express skepticism about the viability of retail market making on Kalshi, while others suggest potential strategies involving statistical arbitrage or focusing on less efficient, smaller markets. The conversation also briefly explores the regulatory landscape and Kalshi's unique position as a CFTC-regulated exchange.

  The Hacker News post "Making Markets on Kalshi" discussing the linked blog post about market making on the Kalshi prediction market platform has generated a modest number of comments, offering several perspectives on the topic.

  One commenter highlights the potential legal complexities of market making on Kalshi, questioning whether it falls under similar regulations as traditional financial market making. They express uncertainty about how the CFTC (Commodity Futures Trading Commission), which regulates Kalshi, views these activities and if specific licenses or registrations are required. This comment raises a pertinent legal concern regarding the regulatory landscape of prediction markets.

  Another commenter discusses the practical challenges of market making on Kalshi, particularly the difficulty of accurately pricing contracts, especially in illiquid markets. They mention the complexities of predicting event outcomes and managing risk effectively. This comment sheds light on the practical realities of participating in prediction markets, highlighting the expertise required for profitable market making.

  Further discussion centers around the limited liquidity and order book depth on Kalshi, suggesting this makes profitable market making more challenging. One commenter observes that the smaller market size compared to traditional financial markets can lead to greater price volatility and difficulty in executing larger orders. This contributes to the discussion about the practicalities and potential limitations of market making on Kalshi.

  A separate thread of conversation explores the broader potential of prediction markets and their potential impact on information discovery and forecasting. One commenter suggests that while prediction markets can be valuable tools, the limited liquidity and participation on platforms like Kalshi can hinder their effectiveness. This comment broadens the scope beyond Kalshi to the general challenges faced by prediction markets.

  One commenter shares a personal anecdote about attempting to predict the outcome of Supreme Court cases on Kalshi, which sparked further discussion about the challenges and potential biases in such predictions. This adds a practical example to the broader conversation about using prediction markets for real-world events.

  Overall, the comments on the Hacker News post provide a mix of practical considerations, regulatory concerns, and broader reflections on the potential and limitations of prediction markets, specifically in the context of Kalshi. They offer valuable insights into the challenges and opportunities presented by this emerging financial landscape.

• The New York Stock Exchange to Launch NYSE Texas

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  Posted: 2025-02-14 06:40:11

  Verbose tl;dr

  The New York Stock Exchange (NYSE) is establishing a new trading floor in Arlington, Texas, called NYSE Texas. Scheduled to open in 2027, this facility will serve as a disaster recovery and backup site for the NYSE's existing operations. It will also house a physical trading floor mirroring the iconic NYSE in New York City, offering a venue for in-person trading and important corporate events like IPO ceremonies. This expansion aims to increase the exchange's resiliency and geographical diversity.

  Intercontinental Exchange, Inc. (ICE), the parent company of the venerable New York Stock Exchange (NYSE), has formally announced its ambitious undertaking to establish a novel trading platform designated "NYSE Texas." This forthcoming exchange, slated to commence operations in 2027, represents a significant expansion of the NYSE's geographical reach and a strategic move to foster enhanced competition and innovation within the financial markets landscape of the United States. Specifically, NYSE Texas will be strategically situated within the burgeoning technology hub of Round Rock, Texas, a locale recognized for its dynamic economic growth and proximity to a rich pool of technological talent.

  The primary objective of this new venture is to cultivate a more streamlined and technologically advanced market structure explicitly tailored to the evolving needs of publicly traded companies and investors alike. NYSE Texas is envisioned as a platform that will leverage cutting-edge technology to optimize the trading process, potentially reducing latency and enhancing overall market efficiency. This will contribute to a more fluid and responsive market environment, enabling participants to execute trades with greater speed and precision.

  Furthermore, the establishment of NYSE Texas is poised to introduce a healthy dose of competition within the equities trading domain. By offering an alternative venue for listing and trading securities, NYSE Texas will empower companies with greater choice and flexibility in selecting the platform that best aligns with their specific requirements and strategic objectives. This increased competition is anticipated to drive innovation across the entire industry, ultimately benefiting market participants through improved services and potentially lower costs.

  The new exchange will operate under the regulatory oversight of the Securities and Exchange Commission (SEC), ensuring adherence to established rules and regulations governing the securities markets. This regulatory framework is designed to maintain market integrity and protect investor interests.

  ICE's commitment to this initiative underscores its belief in the continued growth and dynamism of the U.S. capital markets. By establishing NYSE Texas, ICE aims to bolster the nation's financial infrastructure and contribute to the ongoing evolution of the global financial ecosystem. This move is not merely an expansion of physical presence but a strategic investment in the future of financial markets, embracing innovation and competition to deliver enhanced value to all stakeholders.

  • NYSE
  • New York Stock Exchange
  • Texas
  • Stock Exchange
  • Financial Markets
  • Trading
  • Business
  • finance
  • economy
  • Securities
  • Investment
  • Market Expansion
  • New Market
  • Intercontinental Exchange
  • ICE

  Summary of Comments ( 156 )
  https://news.ycombinator.com/item?id=43045558

  Verbose tl;dr

  Hacker News commenters were generally cynical about the announcement of NYSE Texas. Many saw it as a thinly veiled attempt to circumvent regulations, potentially relating to taxes or data sovereignty, with some speculating about connections to Texas's lax regulatory environment. Several pointed out the irony of a New York institution establishing a Texas branch for supposed advantages, while others questioned the practical implications and whether any significant trading activity would actually relocate. Some suggested the move was more about optics and public relations than genuine operational needs, especially given the existing electronic nature of trading. A few commenters expressed curiosity about the specifics of the "cutting edge financial technology" mentioned in the press release, but overall the sentiment was skeptical.

  The Hacker News post titled "The New York Stock Exchange to Launch NYSE Texas" (https://news.ycombinator.com/item?id=43045558) has generated a modest number of comments, mostly focusing on the perceived oddity of the naming and speculating on the motivations behind it. No one delves deeply into the technical aspects of the new exchange.

  Several commenters express amusement or confusion over the name "NYSE Texas." One comment points out the apparent geographical dissonance, questioning why a New York institution would name a Texas-based operation using the "New York" moniker. They speculate that it might be a branding strategy, leveraging the established reputation of the NYSE name rather than creating a new brand. Another commenter echoes this sentiment, suggesting that the NYSE name carries prestige and recognition that a new name wouldn't have. This comment also proposes that using the NYSE brand could signal stability and reliability to potential investors and companies looking to list on the exchange.

  Another line of discussion speculates on the underlying reasons for launching the new exchange in Texas. One commenter theorizes that it's a move by the NYSE's parent company, Intercontinental Exchange (ICE), to expand its operations and potentially tap into a new market. They link this to ICE's history of acquisitions and growth. Another commenter briefly mentions possible tax advantages or other incentives offered by the state of Texas as a contributing factor.

  One comment simply states that this move is a clear attempt to bring more business to the NYSE.

  Overall, the comments are relatively surface-level, primarily focusing on the apparent contradiction in the name and offering general speculation about the strategic rationale behind the move. There is no in-depth analysis of the potential impacts on the financial markets, the regulatory landscape, or the technological infrastructure.