Let's talk ALGO part 2 ... Now that we understand SIP ... the big question is who are the market makers and what do they do ...

Let's start with DMM or Designated Market Makers. "DMMs have obligations to maintain fair and orderly markets for their assigned securities."

1. "Have true obligations to maintain a fair and orderly market in their stocks, quote at the NBBO a specified percentage of the time, and facilitate price discovery throughout the day as well as at the open, close and in periods of significant imbalances and high volatility"

"a specified percentage of the time" "open, close and in periods of significant imbalances" does that ring a bell?

2. "Provide price improvement and match incoming orders using proprietary trading algorithms"

"proprietary trading algorithms" ahhaaaaaaaa we are getting closer ... another form of ALGO

3. "Are on parity with order from other market participants, encouraging DMM participation and higher market quality"

Wait what? They have parity with any other market participant?

Now let's go deeper. The main liquidity providers for NYSE are called SLP's (Supplemental Liquidity Providers). These firms are only electronic, high-volume members getting incentives for providing liquidity to the market, and by that market making.

So only electronic high volume and they are getting paid for market making ... interesting ... guess you need an ALGO to do that ...

1. SLPs must maintain a bid or offer at the National Best Bid or Offer (NBBO) in each assigned security at least 10 percent of the trading day

wait they have to offer trades at least 10 percent of the day???? One company only?

2. SLPs trade only for their proprietary accounts, not for public customers or on an agency basis

Hmm so they only trade for their own profit. Interesting ...

3. SLPs that post liquidity in an assigned security that executes against incoming orders are awarded a financial rebate by the NYSE

You are kidding me right? So they get a discount for making the market?

4. An SLP can be either a proprietary trading unit of a member organization ("SLP-Prop") or a registered market maker at the Exchange ("SLMM")

Interesting isn't it? So but who are these SLPs really?

Here we go ...

Wow just randomly these are the top quant financial companies all known for their high-frequency trading algorithms.

And guess what ... each one of them uses an ALGO to execute the market-making and liquidity influx. Now we arrived at the ALGO's which are making the price.

Small little bonus ...

"The all-electronic NYSE Arca relies on a system of competing Market Makers to provide a fast, efficient, and consistent marketplace for all participants, including liquidity providers. Market Makers are required to maintain adequate minimum capital and continuous,

two-sided identified and displayed quotes for all registered securities during Core Trading Hours (9:30 a.m. to 4:00 p.m. ET). They also clear and settle transactions through a registered clearing agency."

"during Core Trading Hours (9:30 a.m. to 4:00 p.m. ET)" Anyone can hear the bells ringing? ? To be continued ...