Skewed Quotes

Skewed quotes occur when a market maker intentionally moves their bid and ask prices away from the market mid-price to influence the direction of order flow. If a market maker has too much of an asset, they will lower both their bid and ask prices to encourage selling and discourage buying.

Conversely, if they have too little, they will raise both prices to attract buyers. This technique is a primary tool for managing inventory risk and reacting to market imbalances without having to manually hedge on another exchange.

Skewing is a delicate balancing act, as too much skew can make the quotes uncompetitive, leading to a loss of market share. It reflects the strategic interaction between the market maker and the broader market participants.