The market making game in trading interviews, explained
Why trading interviews ask you to make a market, what a bid and ask really test and a short worked example of the market making game with two dice.
4 min read · RoundReady
“Make me a market.” It sounds like a trick and it often feels like one the first time. In fact it's one of the most honest questions in a trading interview. It asks you to do the job, in miniature, while someone watches.
Here's what the game is, why firms use it and what a good answer looks like.
What the question means
To make a market is to quote two prices on something: a bid (the price you'll buy at) and an ask or offer (the price you'll sell at). You don't choose which side you trade. The interviewer does. If they think your ask is too low they buy from you. If they think your bid is too high they sell to you.
The thing you're quoting can be anything. The sum of two dice. The number of cards left in a shuffled deck before the first ace. The height of the building you're sitting in. Some have a clean fair value and some don't. That's deliberate.
Why trading firms ask it
A probability puzzle tests whether you can find the right number. The market making game tests what you do with that number once other people can trade against you. That's a different skill and it's the one market makers are paid for.
In one short exchange the interviewer can see:
- Fair value. Can you estimate what the thing is worth quickly and explain why?
- Width. Is your spread sensible for how uncertain you are?
- Updating. When new information arrives do you move your prices or cling to the old ones?
- Suspicion. When someone keeps buying from you do you ask why?
- Position. Do you remember what you've already traded and let it shape your next quote?
A short worked example
Two things in that exchange matter more than the arithmetic. First, the new quote is centred on the new fair value, not on the old one. Candidates often nudge their prices a little when they should jump. If the facts move fair value by 1.5 your market should move by about 1.5 as well.
Second, the lean. Being short means you'd quite like to buy back. Raising both prices a touch makes your bid more attractive to sellers and your offer less attractive to buyers. It's a small adjustment but saying it out loud shows you're managing a position rather than answering a string of separate questions.
The myth: a tight market is a brave market
Many candidates think a narrow spread shows confidence and a wide one shows weakness. That's not quite how it works. The spread is mainly your protection against trading with someone who knows more than you.
On two fair dice nobody knows anything you don't, so a tight market is reasonable. On the height of a building the interviewer might know the answer exactly. A wide first market there isn't timid. It's correct. You can narrow it as you learn more.
“I'll buy at your offer again. And again.”
If the interviewer keeps lifting your offer, that's information. Either your fair value is too low or they know something. A good response moves the market up and says why. A weak one keeps selling at the same price because the maths said 7.
How to practise the game
Reading about market making only gets you so far, because the hard part is reacting to a counterparty you don't control. Practise with a friend who trades against you and changes the rules mid-game: reveal a card, roll one die, keep buying for no stated reason. Say your fair value, your width and your position every time you quote. After a few rounds it stops feeling like a trick and starts feeling like a conversation.