Show: Market WineDown Episode: 5 Title: Market Makers Explained & Blind Tasting Gone Wrong | Market WineDown Show Ep. 5 Date: May 29, 2026 Runtime: ~20 min Video ID: jvPQ3OG3ZdY URL: https://www.youtube.com/watch?v=jvPQ3OG3ZdY ============================================================ It's Thursday. It's after the close. You know what that means? It's the market windown. I'm with my co-host Mark Phillips. I'm with Lex. Mark, good to see you, buddy. Um, so, uh, we are just getting back sort of from the big trade of your year event, the trader fest. Now, I know it's two weeks out, but the only reason I say sort of is because I went on a little holiday on the Bahamas on a fishing yacht. Um, and I know you guys are all feeling bad for me, and it's it's it's a tragedy that I had to to endure that horribleness. Um, but we caught 20 mahi mahi and I never want to see a freaking fish again in ter on a on a dinner plate at a restaurant. Not again, but for a while. Have you ever had mahi mahi out of the ocean? Like right out of the ocean? Not as close to the ocean as you were. But uh I am extremely jealous of uh your experience down there. I I would say you were on vacation at Trader Fest and then you go on your second vacation. I did. Yeah, it was it was kind of a vacation trader. It was a little stressful, but um I just want to tell the folks too that you gota watch if you didn't go to Traderfest, you got to see the clips. First of all, it's worth your time just to see Mark's outfit on our panel, our live panel with Jason from our Trader Workshop show. It was fun. Trader Fest was great. You had the cool West Palm Beach outfit or Palm Beach outfit on. Tell us tell us. I thought Trader Fest was fantastic. I mean, it was great to be on the heels of OIC. So, we got a lot of spillover from the institutional crowd, but you know, getting that entire cohort of retail traders down there in a room together talking about trading, talking about strategy, having a couple drinks. It was it was an amazing environment. It was amazing energy. I agree. So, what and you mentioned this morning on our show, it's one of the big takeaways that you noticed, and I think we should say it again for the windown. Um, I'll let you say it, but it has to do with the the the the the prominence in and just total increased value of the retail trader. Why don't Why don't you say it again for this group? Retail's the boss. I mean, retail is the they're in charge right now. They're dictating market structure. They're dictating product launches. They're dictating, you know, they're demanding shares of IPOs that banks would have been happy to get 20 years ago. Uh so it's incredible to see the rise of that you know self-directed trader uh and they're really responsible for all the growth in the market right now. It's not institutions. It's not boring people like me that are advisers and trading options that are generating the big volume. It is individual self-directed buyside pure retail traders. Yeah. And I you know I agree with you by the way and and Henry from SIBO showed that on the on the chart. you know, you you got to see the rise of the the market making trading volume and the retail trading volume. And we know why that happens, right? That's because retail people just by nature have to trade with a liquidity provider. And you know, as they're trading, more so are market makers. They're taking the other side of that stuff. Um, but you shouldn't agree with me that much. Like it's way more fun when we disagree. Don't you don't you agree? I I agree with the disagreeing part, but the problem is that you and I come from the same cloth. It's we're going to disagree very little. I think we got to find that 1%. I know. I know. Yeah. Say something like, we'll figure it out. Say something like, "I love pino noir." And then I'm gonna I like them, too. Sort of. I love California Chardonnay. Uh I kind of do too. There are a couple. I I do have a couple back here. I have a couple of those voluupsuous, you know, just big bold, you know. I I like to tread down that path every once in a while. Yeah. Yeah. It's It's okay. And you know, California Chardonnay got so goofy with the way they they started oaking the out of it. It started tasting like a, you know, like a mothball to me, but um I'm looking for the unoaked version of that. Uh from California, that is the I had a bottle I wish I had it with me here. Uh Wayfairer that my buddy I walk in, he pushes a glass across the table, he goes, "Tell me what this is." And I'm a terrible blind. Like I'm a I'm an awful blind. I know my structure. I know how to look at the color, you know, do the nose. you know, I know all those things academically. You know, put a glass, an unknown glass in front of me. Um, I couldn't get it. I was burgundy. This is definitely burgundy. It's got, you know, that roundness, a touch of oak. It's got that linearity. No. Uh, Soma Coast Chardonnay. That was No kidding. Ridiculously good. So, you liked it? I did. I I could have sworn it was burgundy. I knew it wasn't because it wouldn't blind me on a white burgundy. That's too easy. Um, but just a touch of that like tropical fruit, you know, that I think makes some of those new world Chardonnay a little bit more interesting. Fair, fair, fair, fair. What are you drinking today? Uh, today I actually don't have a wine. I have a mai. All right, we're going to get into matees in a second. Um, it's a summer tiki for me. A summer tiki. I love it. I'm a big fan. I'm going to tell a story about that in a second. But before we get to the drinking part of the the equation, which is the most fun, um, how do we get over here already, dude? That's I'm going to a little charity event at my club tonight. And it's all about the sport coat and what I'm going to be embibing in. How you say it? Embibing in on embibbeing. Embibing. I don't think there's a preposition. You're the English major. You should know this. I know. Embibing. I'm with embibbeing. Um, so anyway, what do you think? what's the biggest misconception about trading and you know from the retail side of things. Um, and you know the pro and and back to why you and I are going to disagree very infrequently, but we might is because we come from the market making side of the business. And for those of you who are watching, that's just the liquidity providing side. That's the professional side, right? We took the other side of all your stuff. Um, as a retail as a retail trader, we have there there aren't any misconceptions on our side of the thing. We have to react to order flow. But you as a retail person, you have to be proactive. You have to come up with a strategy. You have to come up with a thesis. You have to come up with something and then execute it. Do you think there's a misconception that that trade that retail people have about either the markets, about market makers, about retail trading, whatever. I mean, there's got to be something out there that that people miss. I think the biggest misconception and this is propagated by movies and by stories of like George Soros breaking the bank of England. It's the this idea that it's a PVP game. It's player versus player. That you is the, you know, I like to call them the buy side retail. Anyone who's not a liquidity provider is coming to the markets to buy liquidity from the markets. And the idea that you're facing off against the market maker on every trade or you're facing off against some counterparty, well, like that's technically true in a clearing sense of a two-sided contract and all that. That's not the way markets work. That like the individual trader's biggest enemy is themselves. They're not facing off against anyone other than their own problems. Right. I agree with that. Okay. So, that brought up something in my mind and I'm going to ask you about this. Um, I think the biggest misconception is is along those lines and I think it's changing now. I really do. But I think, you know, a year ago maybe or more, the biggest misconception I found with retail folks is that the market making community is out to screw them. And they they they lean on their orders. They see stops above the market or below the market and they lean on them and they cheat them and they they scam them. and it's it's the Darth Vader market maker against the little retail guy and they're always out to get them. I think that could not be further from the truth at all. I think it's the exact opposite relative to that relationship with retail people. What do you think? I think it's kind of like the bear, right? That if you come across a bear in the woods, they're more scared of you than you are of them. that the market makers are more scared of the retail flow of the counterparty flow of someone that's coming in that they don't have any idea what's going on and they're flying blind, you know, asymmetric information about, you know, what might be happening, what news might have come out, even what the strategy is, the size of the order, all that stuff that market makers are running scared. Good market makers are always trying to figure out what the other side knows that they don't. Right. Right. But, you know, if if if if someone's deemed in the customer range like most of our clients are, right? I mean, there's very few pros in in the true retail world. There's some, but not many. Um, a market maker already knows that, right? It's already it's already designated customer when it comes in. And there probably ones and twos and three lots. Isn't that Isn't that the the lifeblood, the nectar for a market making firm? They love that order flow. And and I might add, they love that order flow so much they're willing to pay for it. I know. Right. They're willing to pay to get it. Correct. I I don't think there's a soul in the options business, no matter what facet of the business they're in, that doesn't like retail, that is trying to screw retail, right? that no, everyone top to bottom, brokers, market makers, service provider, like they want to foster retail trading because it's those ones and two lots that keep the lights on that uh not because they're, you know, necessarily like ripping them off and overcharging them or anything, but it's because it's random nonmarket moving flow and and that's what feeds the beast. I agree with that. and and and you you you wrote a great piece for for the FINRA uh comment period relative to PDT and you mentioned that in the piece which I thought was really good. Um that feeding the that feeding the fire and and every one of those little clicks I saw little small cuts um in the marketplace by retail people that gives the the the the liquidity providers just information enough to price things even better I think. Right. And and they're all about that. they can price things better and that's the kind of order flow that I think they generally like they they love to do it millions of times a day which I'm sure they do. Um I think it becomes difficult for the market making community when they get the big institution coming in and trying to you know move curves. Not that they're not really trying to move curves but because they're so big it's like uh what am I going to do with all this inventory now? Now they have to really think hard and start start you know doing the dance. Right. Correct. They have to think about it in a way different way. Even if it might be just as non-market moving as anything, you can't treat the 500 lot the same way as the five lot. I agree with that because you don't know what's after the 500 level. Could be another 500, another,000, another 1500, another 15,000. You know, that's that I didn't like when I was a market maker. I want to know, let me get on the last batch and then I'm happy. Yep. All right. Well, I got one for you now. Okay. What is overrated in the markets? Now, I wonder if that means like an if you mean like an indicator of sorts or, you know, a a tool that that retail people use that I think is a waste of time. Something like that, maybe. I did. You did. Are you looking at my notes? No. The uh that's absolutely like dealer positioning. Most overrated thing in the markets. Dealer positioning. Listen, God bless, buddy. Next to squat. You don't like it, do you? You hate it. I It's not passive. It's active. I I detest the dealer positioning theory. Well, it doesn't make sense. You sat on that side of the desk, you know, it doesn't make any sense. Yeah. I mean, I think if you're the only dealer in the position, it makes a little sense, maybe. I don't know. And that you're a sole provider and you don't you're not dispersed in a gigantic book, maybe. Um or you're in a meme stock, maybe. Or probably. But if you're like Susuana or Citadel, they could care less what their position. Their gamma is in any one stock. It's just like a big amalgam in a pile of crap, right? Or a pile of good crap. It smells like a rose to them. So, I don't know. The idea that these guys are trading tens of millions of contracts a day, making, you know, generating revenues in the billions. Yeah. Like are bad at hedging, like that's that's literally their job. And if they were bad at hedging, they will quickly be out of a job. So, I agree. I I think they I don't even think they hedge every trade anymore. I really don't. No, I mean you that's I mean no matter even we didn't he hedge every trade, right? Like the odds that something will come in, someone buys calls, someone buys puts, someone sells puts, you know, your deltas could go any which way. And do you think Yeah. Do you think that's interesting because do you think that the big firms I'm not talking about the one you were at because I it's a big firm but you guys had a little bit different structure but someone like Citadel or Suscuana it's like a it's like a it's like a vacuum. it's just sucking up order or you know order flow across the whole gamut of things they trade and you know do you think that if they make a trade in Tesla um and then they get another trade in Nvidia they got this all honed down to just a big book don't you think? Oh absolutely. I mean when you were in the pit and like this is the way we learned to mock trade right someone comes in buy 10 Tesla calls and you go okay 50 delta I sold 10 calls buy 500 shares and you had to do that because you had to hedge you know and that's the way the dynamic works but in reality you're managing whether it's just within that you know single name or whether you're doing a soup of names or whether you're hedging it with futures because that's the cheapest way like when a dealer goes into a hedging market they're you know they're the buy side right they're buying liquidity from whatever like underlying instrument they're hedging with and that's expensive. Like that's they want to minimize and reduce and do that as efficiently and infrequently as possible. Yeah, I I totally agree with that. I and I guarantee you a firm, you know, Saskuana I thought was the best at it. Um, I bet you that they let their their staff trade and then whoever their risk manager is, you know, managers, they probably look at that book at I'm making this up, 10:00 a.m. and then once again at 2 p.m. And if there anything is strewn out, they might hammer it back in the in the into, you know, some sort of range of sorts with hedging. Otherwise, they're letting all these people trade, you know, just get edge all over the board without spending the money like you just said on the buy side of of of a hedge, right? Exactly. They're, you know, they're they're the ones feeding that market. Yeah. Uh and, you know, you want to do that as infrequently as possible. Yep. All right. Um, so just for, you know, these are little clips that we're doing on the windown. This is not the show. This is Mark and I just ripping and we're going to rip a lot. Um, we want to make it feel like we just got off the trading floor like we used to. We're sitting at the at the bar or at the the poker table upstairs. We're having a cocktail because we did that a lot back in the day. Um, we want you to send your ideas to us, okay? So, make sure when you when you're doing these things, you you hit that that comment button. Um, we want to hear what you want us to what you would like to hear from us in terms of what we should cover and talk about. This is a casual show. It's lifestyle. It's fun. It's what you do because you've done so well in this business. Um, and it's, you know, and and it's going to be kernels of truth in in in the markets, too. We can go deep. We can go shallow. We can go sideways with the markets. And guess what? We can go deeper with wine and lifestyle and travel and all kinds of fun that comes with it. Um, so make sure you comment on these things. Um, we'll be going live soon, right? My X is our sponsor. Um, that's the the Miami Stock Exchange. Uh they are great folks. They're looking forward to this. I know we are. We're gonna have some really cool things, but we want to make it really casual and light-hearted. Um but still have that little kernel of truth wrapped down in there somewhere on the financial markets. And we're going to talk everything. I got a queue of like a dozen bottles of wine I want to open for this show. Oh yeah, for sure. But are we going to talk crypto? Are we going to talk forex? Are we going to talk futures? Are we going to talk options? Are we going to talk stocks? We're going to talk all this stuff, right? And you know what? When we don't know an answer, we're going to fake it. I'm kidding. We're going to say we don't know an answer. Best thing you know is what you don't know. I know. I love learning, man. I learn something new every day. And I got to tell you, I can learn from you retail folks. I really can. I uh I I this retail stuff is tough tough work, man. I'll tell you, it's not like the the pro side. And you guys would think pro side was really hard because of everything that goes on. you have to have a probably a little bit deeper understanding of of markets and what have you um versus retail, but doesn't mean one's better than the other or they're all good. You just have to know what you're doing, right? The pro retail trader knows just as much as the institutional trader. And if anything, they're fighting a harder battle. Uh you know, and I think what's amazing is you remember how tight lipped we always were that you wouldn't even, you know, we had code names for our different hedging software and whatnot. We called our hedging tool the gardener. um that that that got out after about five minutes. Um but uh no, now the the sharing that goes on in the pro retail community is incredible that there really are, you know, there's a lot of garbage out there. There's a lot of garbage, but there's an enormous amount of information and high quality information out there uh for for the pro retail community. Yeah. No, I agree. I agree. It's it's it is crazy growing. Um so yeah, we're gonna we're gonna really break that down and show some things. Um, I've got a great one for next time, too. Someone asked me about um a Delta problem that they saw with our platform versus, you know, the the popular other ones, and they showed me it on the screen. And we'll this is a lead into next time. Um, and I looked at it and I'm like, that can't be that delta is not right on your the one you're showing me. And I explained to them, I showed them a little trick with the option grid of how you can you can prove it. And I want to show that on the screen next time we do it. Um because I think you're you know you know this stuff. I know this stuff. But the guy looked at me and said, "Never thought of that. That's that's that's amazing. You're right. It's got to be that number. Your your number's the right one and this one's the wrong one." So, but we'll go over it in detail um on one of the subsequent shows, but it's kind of cool. You love your synthetics. It was syntheticy. It was syntheticy. It really was. What is today, by the way? Thursday. Synthetic Friday. It's a goddamn synthetic Friday. You know why? Because Friday is a golf day. We do golfing on Friday. Yes, we do. Although this week I golfed yesterday, so I might golf tomorrow again. We'll see. All right. So, synthetic Thursday means it's kind of like a Friday. It has the same properties as a Friday. Um, so, you know, it's kind of like a synthetic Friday on a Thursday, especially if you have a day off on Friday. All of a sudden, Thursday really becomes synthetic Friday, right? On going into a four-day weekend then. Yeah. And Sunday, Monday is going to be synthetic Sunday, right? I've never heard that one. I like. All right, buddy. Good to see you. Uh, we're the market windown. That's Mark. I'm Lex. Um, check us out every Thursday live at 3:15 p.m. Central, 4:15 p.m. Eastern time because why? That's when the market closes. So, we want you to get a little little bubbly bubbly and join us for about a half hour um when we talk about the markets and about some of the things we're doing to have fun. What do you think? You like it? I think show up at Synthetic Friday with whatever your choice of beverage might be. Doesn't have to be wine, can be bourbon, it can be a M Thai, can be anything under the sun. We're we're good with that. Yep. Let us know and and we will find it and we will show you how to make it. It's really cool. I'm a big mixologist, so we're going to get to that. Cool. I agree. All right, buddy. Cheers. Happy trading. That's Mark's phrase. I said it for him. You say happy trading because you're better off. Cheers. Happy trading, everyone. All right, you guys have a great weekend. Mark, have a great one. Talk to you later. You, too, Lex. All right. Bye. You know how the financial world goes. Here comes the buzzkill. Please make sure to take some time to read this boring disclaimer. We will owe you one.