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Chris_Reeves

Why isn't Ripple a Market Maker?

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14 minutes ago, Professor Hantzen said:

They do sell directly, on well-known exchanges.  The amount they sell on-exchange is published in the XRP Markets Quarterly Report. For example, in the most recent report (referring to XRP II, LLC) :

"Additionally, the company sold $151.1 million worth of XRP programmatically, as a small percentage of overall exchange volume. These sales represented 0.095 percent (9.5 basis points) of the $160.0 billion traded globally in XRP in Q1."

Elsewhere, David Schwartz has stated that these programmatic sales are both buys and sells that result in a net sale, which - despite what I said earlier - could indicate they are engaging in MMing themselves directly. But, it could also indicate arbitrage (which is effectively the opposite of MMing), or it could be just about anything else.  So assuming its market-making given the limited information I've seen is a bit of a crapshoot. It's also reasonable to assume they don't want to specify exactly what they're doing, as in general, specifying ones automated trading strategy is a bad idea as others can use any knowledge to gamify against your strategy.

Personally, I don't believe they are actively engaged in MMing, but this is based mainly on personal experience.  I guess it is possible they could have made new hires and started something up, but I think its more likely they have just built something much simpler based on volume & volatility metrics that is intended to sell large quantities with minimal market disruption.

Esseentially, as soon as you try to beat the market and squeeze certain profit out of it, its a race to the bottom and a pain in the ass.  I just don't think its their style or interest, based on my knowledge of them - but I could be wrong, or it could have changed over time.

Indeed! And it's a great strategy, as it's much, much easier for someone to take a punt on it if they don't have to front all the capital (and if they mess up, can just pull the plug at whatever % loss they are comfortable with).  And whether they win or lose, XRP enjoys tighter spreads and greater liquidity for the duration any of them operate, making it a no-lose proposition for Ripple.  Personally, I think they could go further to really ramp things up, and just take a hit on the loans - eg, take a reasonable negative interest on them but with a guarantee on volume, and if someone slowly bleeds it all away, well they basically just bought the liquidity for the duration and at a calculable, predictable level.

Nice analysis! Would love to know what @miguel knows.. getting liquidity is one of his major tasks, and with his huge experience in financial markets (and I guess a smart mind to couple various options) he probably set sail to this direction a decent while ago?.

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1 hour ago, Amigo said:

Personally, I think they could go further to really ramp things up, and just take a hit on the loans - eg, take a reasonable negative interest on them but with a guarantee on volume, and if someone slowly bleeds it all away, well they basically just bought the liquidity for the duration and at a calculable, predictable level.

Yes everything they say and do indicates an openness and willingness to kickstart the system.  Given the circles the board members and execs come from,  I would be surprised if they are not doing stuff like this including via informal opportunity mentions to the right people.

Brad alludes to it when he refers to the XRP that they own as a War Chest...  that is to say, money we are willing to use to advance without being parsimonious in its usage.

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16 hours ago, Raz said:

I’m confused. This article explains https://www.sovereignman.com/finance/it-begins-us-government-issues-700000-fine-against-a-digital-currency-16907/ all of the legal issues if they sold directly to someone. Perhaps I misunderstood and the exchanges handle all the red tape so Ripple can sell?

I'm not an expert on this ruling, but that article seems to want to make its own point and only focuses on one aspect of the case. As I understood it at the time, the fine was not the big deal - the major outcome from the case was that Ripple was ruled against offering consumers wallet software directly, so they had to wind-down Ripple Trade which was the official "XRP Wallet" they had put a lot of resources into.  I guess they were also tasked with setting up an MSB and filing appropriate returns, which is what I presume XRP II, LLC is. Certainly, that is the entity through which legitimate and legally-compliant sales are now conducted, whether on or off exchange.

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16 hours ago, Amigo said:

Nice analysis! Would love to know what @miguel knows.. getting liquidity is one of his major tasks, and with his huge experience in financial markets (and I guess a smart mind to couple various options) he probably set sail to this direction a decent while ago?.

So would I!  To me, he's the nexus of many of the recent years developments with XRP.  When Ripple created the "Director of XRP Markets" position and hired Miguel, I was excited as it seemed to be exactly what was needed.  Everything he's accomplished since has been great - the listing on many exchanges, the establishment of the Quarterly Report and the turnaround in openness about XRP sales this represents, the (failed, but still earnest) XRP exchange promotions, the institutions now buying in, and more - it just feels like XRP is more liquid and flowing in many directions.  It seemed like his hire, given his background, symbolised some kind of a legitimisation of the concept of digital assets.  Obviously people talk to each other in finance about who hires who and why, and the fact he's so passionate about XRP & Ripple in many of the same ways we are is great in that regard also.  I don't think its a total coincidence that not long after he was hired the stagnant-for-years price of XRP suddenly bolted up.  To me it represented a positive sea-change - maybe those with deep pockets saw it as such also.

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1 hour ago, Professor Hantzen said:

I'm not an expert on this ruling, but that article seems to want to make its own point and only focuses on one aspect of the case. As I understood it at the time, the fine was not the big deal - the major outcome from the case was that Ripple was ruled against offering consumers wallet software directly, so they had to wind-down Ripple Trade which was the official "XRP Wallet" they had put a lot of resources into.  I guess they were also tasked with setting up an MSB and filing appropriate returns, which is what I presume XRP II, LLC is. Certainly, that is the entity through which legitimate and legally-compliant sales are now conducted, whether on or off exchange.

Sure, you are definitely correct that they sale on exchanges so thank you for correcting me on that. 

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22 hours ago, IAmATroll said:

Because the got in trouble for it before and do not want to enter that realm again.

http://www.businessinsider.com/ripple-just-got-slapped-with-a-700000-fine-2015-5

They got fined for "acting as a money services business (MSB), and selling its virtual currency... without registering with FinCEN," as well as for "failing to implement and maintain an adequate anti-money laundering (AML) program designed to protect its products from use by money launderers or terrorist financiers,"

If they registered with FinCEN and implemented robust AML controls then what is to stop them doing it legitimately?

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