Market Making Trade Size Update Interview
Market making trade size update interview guide for interpreting small versus large trades as inventory changes and possible information.
Candidates updating quotes after small versus large trades.
Trade size changes risk
A large fill changes inventory more than a small fill. Even if fair value is unchanged, the position risk can force a quote update.
Size can contain information
A large aggressive trade may be more informative than a tiny trade, but it is not proof by itself that the counterparty is informed.
Concrete example
If someone buys one unit at your ask, you may make a small update. If they buy your full available size, you may both adjust fair value and reduce future ask size.
Separate inventory and inference
Say how the trade size affects your position, then say whether it changes your belief about fair value.
Adjust size as well as price
After a large trade, reducing displayed size can be cleaner than only widening the spread.
Common mistakes
Candidates often treat all fills the same. Trade size matters because risk and information are both size-sensitive.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.