On: A High Frequency Trader's Apologia, Part 1

[paperwork]

Minor point, but actual market makers are required by law to make markets. In fact, the market makers basically are the exchange.

This is different from hedge funds which act as market makers by earning rebates by providing liquidity. These guys (and gals) are have no regulatory requirements to make markets.

[lmm → paperwork]

The two do overlap though - some large hedge funds do become market makers in the legal sense on particular exchanges.