When doing MM people in the industry say that most of the time they have a signal, which give them a faire value of the instrument and they quote around that. For RFQ it makes sense since there's no CLOB. Though for MM on CLOB I don't see how it makes sense. If the best bid is $b$ and the best ask is $a$, if the faire value is bigger than $a$ then I am not going to quote a round that since my bid will be higher than the best ask which doesn't makes sense.
Hence I am wondering for MM in orderbook what is the fair value used for?
One thing I can see is that in the example above is thta if the fair value is above the ask price then I can quote on the best bid. So I just add order on the best bid, but in that case I guess this doesn't make me a MM since I am quoting just one side. Or I just quote both side if the fair value I get is the current mid?
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$\begingroup$ MM for Maket Maker? RFQ, CLOB? $\endgroup$Mats Lind– Mats Lind2025年02月05日 13:14:36 +00:00Commented Feb 5 at 13:14
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$\begingroup$ @MatsLind MM for CLOB $\endgroup$autoregressive_monoid– autoregressive_monoid2025年02月06日 12:46:21 +00:00Commented Feb 6 at 12:46