Interview with a Market Maker | Crypto Mastery with Reece Ringnald


alright hello everyone and welcome to something I’m very excited for today is the 27th day of January year of our Lord 2018 it is Saturday and we are here with David s and he is a market maker he trades on the futures markets the commodities markets every day so what he does for a living so I’m very excited to bring him here David would you say hello it reads things were heavy on alright man well listen I know you can’t say too much but could you just give us your like your background can you tell us how old you are and how long you’ve been been a traitor I’ve been I’ve been a trader for about five or six years I started in 2011-2012 I’ve been working professionally at the Chicago Board of Trade which is now known as CME Group since 2014 and I’m a market maker there we run a lot of liquidity providing schemes such as those high-frequency algorithms that people was complaining about yeah we’re one of those things like you know commodities interest rates equity indexes were we’re in there we’re providing liquidity for anyone who wants to buy and sell ok awesome and I can you tell us a little bit about so what you do on a daily base you said that you’re you told me that you are a commodities trader commodities future like can you be a little bit more specific about what you do usually I know in the trading floor you know back in the day when you know in the 80s and even part of the 90s you see those old movies where there’s a bunch of guys screaming to each other in the pit you know that this just doesn’t happen anymore everything happens electronically now you know when I’m trying to yell an order to the guy across the pit for me you know that’s slow it takes time you know but a computer screen one click and I’m in and out of a trade so I’m saying behind you know maybe 1012 monitors and I’m looking at maybe up to 30 different markets looking to see where I can you know find some traits to put on where I can see some opportunities to make money you know I’ll have Bitcoin up you know I’ll have you know gold silver you know ESPYs Nasdaq’s you know corn soybeans even things like catalogs everything all commodities that’s tradable traded okay so you and are you an options trader or just futures trader but I most of my volume 95% my volume is futures right now okay okay cool so tell us a little bit about how a futures contract works like the basics of wouldn’t you put in an order how do you determine you know where I’m gonna buy when I’m gonna sell things like that the very basics of what you do so as a market maker we’re actually always hedged we could have like 10,000 bonds on and we don’t want to expose ourselves to directional risk of whether the bond price is gonna go up or down or for say for instance we could have 10,000 Bitcoin features on weed okay and you say we we so you you are working your company so this is not your personal or money that I am trading this is my training for my trading firm provides us each individual trader more capital than we own and so we’re leveraged in a fact but you know we could have make a living off trading you know a hundred thousand you know you can only make if you only make ten percent a hundred thousand make an awesome year right right gives us millions of dollars trade with and if you’re making ten percent on a million you know you can make a living wage doing that right right so you make a percentage of okay right we make a percentage right but anyways to get back to your some questions yeah we could have 10,000 Bitcoin on and we don’t you know Bitcoin can move a thousand dollars a minute and if you have ten thousand of those on you could lose ten thousand dollars in a minute okay but you said you’re not usually in cryptocurrency you’re not usually in BTC future we’re not example right so we’re hedged anyways but say Bitcoin you know every time I buy a Bitcoin contract I’m looking to sell something that’s either associated or correlated with Bitcoin which is nice right now because there’s two Bitcoin features when provided by simi group and the other one by CBO II across the street so what we’ll do is a market maker for instance is that we’ll be trying to buy Bitcoin for twelve thousand at the CME Exchange and try to solve for twelve thousand fifty bucks at the SIBO exchange make the $50 difference we’ll do that all day long all day long but the point is that every time we’re buying a Bitcoin were selling somewhere else or hedging it through we could hedge it through an options market if there wasn’t an options market available for Bitcoin so we’re doing all day long so you are making your money primarily on arbitrage yes where arbitrage yeah okay and overall do you just give me a rundown of life well let’s start out first with your professional opinion then we’ll get into your personal opinion but what is your relationship with cryptocurrency from from a training perspective and how popular is it in your industry right now so my relationship a bit quick goes back to maybe 2009 back ten years ago my buddy he he’s the kind of guy who is always like into all the you know weird fringe stuff and back in 2009 he was like hey man you know I bought this really awesome PC because I’m trying to MIT – stuff called Bitcoin I’m like what’s Bitcoin he’s like oh you know you can use it to you know make anonymous transactions and it’s great you know you I can devote some electricity cost in my pcs video card – you know mine’s a Bitcoin and it’s actually worth something you know and back in the day I was only worth maybe a couple cents per Bitcoin but you know mine enough of them or you know buy some through their exchange they would have exchanges back and I don’t know how he was getting Bitcoin but he had a bunch of it and he’s using it to make transactions over the Internet I’m not going to comment about what kind of transactions they were but he was using them yeah a couple years later actually he moved to Texas and he at this at this point is maybe 2000 my home my home state for anyone wondering he’s in he’s in Houston right now but he actually had cars with his Bitcoin that he mined back in 2009 and I think he sold it at 10 bucks in mice alright so when would it when did your personal relationship start and not this year during that first big bubble which is not even a bubble compared to where prices have been lately you know I I first started getting interested in when I surpassed to 500 600 dollar mark it almost went to a thousand in a week from the time it was at a hundred to a thousand it took literally a week and I’m like I’m jumping on the street you know so I did you know I bought some Bitcoin back cousin loved us 12 and you know overnight I remember that I first used to collapse were death where I went down to 500 or 600 bucks from from 1000 1200 and so were you looking just to make a quick trade back then or were you looking at a long term investment it was a combination of the two actually you know I was doing a lot of research about Bitcoin back in a day and people like oh yeah it’s deflationary you know it’s protected against inflationary forces it’s anonymous it’s decentralized it’s very secure because of the protocol all those things are awesome you know and I liked I liked everything else hearing and a lot of speculators back in the day we’re talking about oh yeah Bitcoin you know in a couple of years or even you know a couple months this thing could be at you know ten thousand a hundred thousand for Bitcoin and I was a little incredulous about those claims you know even to ten thousand mark seemed a little sketchy to me but a couple of a couple years later here we are at 10,000 you know so eleven five right now yeah so when did you first get on with your trading firm on this current trading firm I started at the beginning of last year but it’s basically the same building as the other firm I was working at they’re actually just a floor away from each other but yeah I’ve been working at the board trade for four years now yeah and so tell us exactly when when did Bitcoin futures come out I know it was in December but it was in November December it was December it was right after Thanksgiving in right before Christmas listen worried was your trading firm on it like the second it came out no we were actually just watching you we had the windows up for Bitcoin but it was too thin that there was not enough liquidity in there and the price fluctuations the first week when I came out were crazy so that yeah I think it about 10,000 bucks in the first week you just came out and we were a little edge down afraid to get into them now if you are arbitrage errs and it only I think it came out on the CBOE first yeah that’s correct okay so you didn’t have a chance to arbitrage when it first came out until it went on the CMAs as well wait there are ways you can arbitrage it with do you know GX what else yeah so you’d be buying the future and then so on the cash market which is the G Dax exchange what we’re talking about but there’s some inherent risk there due to the difference between future prices and cash prices they don’t have to stay exactly in line with each other so that’s the primary risk there so typically now are you trying to arbitrage between the spot and the future or between the two futures between the two futures in here and risk was trying to arbitrage the future because the future is actually trade I think there’s a two thousand two one thousand dollar spread between the futures and spot right now so that’s the risk there and the futures only like a couple dollars spread right now between the CBOE and the C in these contracts so that’s what we like to see these small spreads so you said that you don’t generally braid in Bitcoin it’s not your primary thing that you do do you have people at your company that do Bitcoin every day who are in it every day they have algorithms running every day and it’s not it’s not constantly trading it but whenever they whenever the algorithm senses a opportunity to arbitrage or make money on the Bitcoin contracts it’ll automatically to it so yes there are people who are running algorithms in the Bitcoin markets right now at my firm yes okay so we are gonna get right into right into the big question here and I apologize we’re about we’re about to bring out the harsh language but my buddy here made it very clear to me in when we were discussing an interview earlier this week he said and I quote we’re the ones who are you so please lay it out man hundred percent tell me how and and you know how are you us how are you the public this is our job to make money on the markets and I don’t know if you guys are aware of how the markets work is someone has to lose money for us to make it and we have mortgages to pay you know bills to pay and we’re gonna pay them and if we’re not making money on someone else’s a mistake we’re not making money we’re not being successful traders so you know we have all the technology we have all the high-speed infrastructure we basically see the information before anyone else might creating desk is above the above the exchange I see that information just simply due to the physics of the situation is because the information can get to my desk faster than they can to anyone elses you know in the world and so it and so do that fact alone and that my algorithms will automatically detect these advantages that the markets given up to us it’ll automatically do the trade for us faster and emotionless it’s sometimes we just call them you know mudding printing machines because sometimes our computers just print money we don’t even know what it’s doing but you know we’ll get all these noises that we’re getting traits filled and well look at this screen I’m like oh I just made seven thousand dollars you know and that’s seven thousand dollars that came from someone’s pocket do you have an idea about how these are algorithms are programmed what are they programmed to see their program to see price discrepancy is you know for instance if you can buy Bitcoin on CBOE low and sell for high on CME it will just do it automatically they’re programmed to see arbitrage the program to see risk-free profit if I were to buy market here and sell market there for free money why wouldn’t why wouldn’t we do it of course we do it and our algorithms see do you / are you able to / I’m obviously you are but how are you able to overcome the fees that are charged every time you do that because there’s a fee every time you you buy a market order sell a market order there’s actually members of Trade week you know we have to pay I think right now the market rate is about a million dollars for a seat at the board of trade but once you paid a million dollars and you have a seat they charge you such low commissions it’s stupid I think we paid 10 cents to click the button for interest rates in Treasuries maybe 25 cents for me that’s that’s interesting yeah but you pay the million dollars upfront and you better believe we’re trading your asses off to justify the cost of the membership see but we paid just so low Commission set it doesn’t even matter oh that’s C I didn’t know that and I don’t know how many people watching this would know that y’all actually hey you pay it for a seat at the Board of Trade giving you those low that’s C and that’s one thing always thought about is if you’re doing high-frequency trading the the fees in and out I’m as for you know I could never do that because the freezer or high fees are high I think it’s like 10 bucks to buy or sell brokers smokers are about 10 bucks on my TD Ameritrade account but you know G G taxes when you’re buying spot Bitcoin it’s it’s less than that and with cryptocurrency it’s it’s less than that that’s good so you told me to stay out of the way or or something like that like what are your warnings to the general public when they get involved in and I want to separate two things before it before I apologize for interrupting but I want to separate two things so you’re mostly dealing your in with the futures you said you you did some but you’re not often dealing with the spot price let’s keep those two things separate so where what risks do you have in trading Bitcoin futures and then we’ll talk about your thoughts on cryptocurrency the spot prices in general later so let’s stick with the futures for now it’s Alec is it possible is it possible for the little guy to beat a trading firm no like you always it’s very very difficult and it depends on it actually depends on on one thing and the thing is are you day trading Bitcoin if you’re looking to day trade Bitcoin you’re gonna lose it’s not a winning game we as I said before week we see the information faster and it’s not that we’re clicking buy and sell in these Bitcoin futures manually it’s our algorithms that are doing it and they do it so much faster zero commissions you can’t out trade and a computer algorithm it’s possible so my suggestion or my warning is to not you day trading Bitcoin futures I think you have a better chance of making money if you’re you know looking at a time frame you know maybe a couple days maybe a couple of weeks of holding on to a position in Bitcoin I think that’s I think that’s the wiser thing to do if you are interested in trading Bitcoin at all okay and let’s talk now let’s get into more your your personal thoughts on cryptocurrency in general so do you have any positions in any altcoins or any cryptocurrency right now the last position I had was actually a short position and that was that was maybe a month ago now now that was on the futures that was on Bitcoin futures correct you know I think I made a couple thousand dollars and was it it was it an inch are you holding did you hold that contract for are you do you only do in chordae contracts or do you sometimes hold sometimes hold this was a this is what I call a position trade where I think over the course of you know maybe a few days or a few weeks and the price is gonna do exhales so when do BTC I mean I know I could look this information up online but everyone watching when do BTC futures expire and when do they when is a new contract begin on so if you look at yes so every future has a month associated with it right now let me take a look it is which I believe is February the month code G stands for February in Chicago and so at the end of this month G eg which this reverie will expire because it’ll be February at the end of this month so if you look at the futures contracts they will have a a one letter code followed by the last year I mean the last digit of the year so right now it’s BTC or xbt g8 and at the end of the month before the calendar code is when that contract as we say comes off the board or expires and that is that was yesterday corrector no it’s what today’s the 27th 27th and there’s still three trading days left in this month the 31st is next Wednesday so next one that is when the Fed Bitcoin contract will come off the board or expire okay so is it I was reading some stuff online at a big part of a recent crashing in Bitcoin prices had to do with futures manipulation do you agree with that or is that a little bit – I think I think any type of there is a lot of futures manipulations going on not just a big for me it’s happening all the time but that should only affect the price momentarily I believe fundamentals is what rights the price in the long term and short term manipulation is merely to make fluctuations in the market just as I said before in the short term they should not affect something in the long term because in the long term the fundamentals what drives the price if you are a spot price bitcoin trader just a buy and hold investor should you look at the futures prices whatsoever it doesn’t really not matter it doesn’t really matter because futures should trade in tandem if you know futures go up like this spot should go up like that they should never diverge and when they do is when market makers like us bring him back in mind because they should not they should not I know that Bitcoin futures were trading above Bitcoin spot for pretty much the entire month of December if I’m but they should you know say good point teachers are here spots right here they should move like this in tandem right okay right they should not be going like this and if they do it’s our jobs to make it go back in line okay that’s interesting so I think we’ve got most everything in on futures and kind of not on what you do um so let’s let’s talk just a little bit of your personal thoughts about cryptocurrency what are your thoughts about cryptocurrency just personally you know just like crimson I like to I like the concept behind it I like technology the protocol you know it’s it’s great and you know it reminds me a lot of when BitTorrent first came out and when BitTorrent first came out that stuff was amazing it still is amazing it’s like a distributed form of you know I mean Bitcoin is distributed ledger basically but you know BitTorrent is the distributed file transfer protocol and I think the concept of you know it’s not it’s like crowd what do they call a crowdsourcing but it has a similar concept behind it I think that’s the future of how things work you know you can see it in modern day technology and modern day services even like uber I mean that’s that’s a crowd-sourced you know distributed you know form of you know a form of Technology same with like Airbnb and and that’s where the trend in modern day technology and Marcus has kind of been headed towards so in that respect I love Bitcoin and the fact that you know it’s it’s you know there’s not an anonymity associated with it that’s awesome cool level right to it to a level my only concern is that the price was just it was out of control way too long you know I saw it and go up to 2,000 bucks I thought that was a pika I thought that was the peak of the bubbles at 2000 late last year but you still talk with your talk with your buddies at the trading firm about about Bitcoin often yes and no it was a bigger it was a bigger topic back when it was on it’s astronomic rice from you know 5,000 to 20,000 that that was everyone I’m in training for and was talking about that that was the buzz back then now we kind of think that this ship is sail and it’s kind of like you know calling off its highs and no one’s really interested in the Moors the price is kind of stabilized around you know 10,000 to 12,000 and you know no one’s really making a buzz about it anymore but we do still watch it just in case you know something happens have you you watch the news coming out of South Korea for example some of the latest news on crypto that we have like a Rance clock feet or whatever they call it nowadays that basically it’s like a big speaker in our trading floor that announces any news the second comes out and yeah that thing was definitely going on about the whole South Korea regulation incident when the news first came out but surprisingly the price in and drop too much it was maybe a couple thousand bucks well yeah I mean regulatory news out of South Korea when that hit it went from about fifteen five to it dipped below ten K and then it it has recovered yeah it’s it’s an around eleven five right now and it’s hovered there for a while the big news was not sabre-rattling that cryptocurrency exchanges in South Korea the big news was that six South Korean banks now announced that they’ll be hosting cryptocurrency exchanges so they did a 180 that was the big news and that’s why Bitcoin recovered a lot of around for in my estimation the reason that Bitcoin did not sail even further down was because the news came out that actually there’s gonna be six banks hosting cryptocurrency exchanges in South Korea and I in South Korea has the largest per capita adoption of cryptocurrency in the whole world so it’s a big deal whatever they say in South Korea China China banned crypto currency exchanges five months ago all right yeah yeah they were subsidizing Bitcoin mining for a long time and there are still most of the miners are still in China but the exchanges were banned the fees for electricity they stopped subsidizing electricity in western China the fees have been raised and China’s pretty well crackdown on cryptocurrency for now for the foreseeable future but uh South Korea went in the right direction Japan is where it’s at and and you know we’re having some regulatory risk cloud over us in the United States but nothing major yet but South Korea went in the right direction so right but you know the more mainstream this this cryptocurrency stuff gets the government’s gonna want to interfere and that that’s the the main deal is that right now already you’re paying taxes on it as a form of investment the the regulatory risk is there but you know it’s cryptographic currency it’s hard to even see how they will even fully regulate cryptographic Turan see they don’t understand it so but they can shut down the exchanges exactly and you know if your bank comes you know where that came from if you made it off they call you know whatever you’re gonna have to pay taxes on gotta pay your taxes you got to pay your taxes yeah for sure it’s not here yet but trust me when there’s a lot of money being made anywhere Uncle Sam’s gonna want to share it so but beyond the if we can get over the regulatory risks I’m very hopeful for the future I think that kind of like you were talking about I think this distributed technology of any kind really is the future as long as we can get past the old monolithic regulatory giants you know I’m making a big bet I’ve actually started a whole brand a YouTube channel everything around cryptocurrency daily daily news updates informational content like this on cryptocurrency and I’m making a big bet that it’s gonna work out so you know I’m there it’s cool well any listen man this has been very informational do you have anything that you would like to add like for just the I have a lot of people who are not super familiar with market makers or futures or I have a lot of people who just threw 100 bucks 200 bucks in a cryptocurrency and they don’t even really know what you do so you know any wants to get into the markets or aspiring to be trader just be careful because it’s it’s a predatory market you know everyone out there looking to make money and if you’re not the smartest or not the fastest it’s the money he’s not gonna last very long do your research do two due diligence and be careful alright well alright David it’s been good talking to you man and yeah for sure alright everyone this has been restring not bringing you crypto mastery and i’ll talk to you very soon

Add a Comment

Your email address will not be published. Required fields are marked *