Hi,I am a CFD marketmaker and my clients trade against my book in all Assetclasses (Indices, FX, Commodities, Stocks and Bonds - no Options).Say you are my boss and say you understand business, risk, clients and sources of revenues. How much money would you expect me to make? I am not expecting a number like xyz USD, I expect somthing like a function of turnover, spreads and so on....Thank you in advance

Come on guys. Isn't there somebody around here who has experience in setting P&L targets for Traders?Kind regards

Here's what I would do... Assuming I know nothing about you, I would set the target very low initially (say, zero, for a nice round number) with a reasonably tight stop. If you outperform such modest expectations, I would set it higher the next year.Personally, I prefer a conservative and empirical approach to these things, rather than a "model-based" one, so to speak.

OK you do not know me but you need to take into account that I make 2 way markets and my customers trade on those Spreads. So the number must be well above zero but where?

Ye, but since I don't know you, why should I necessarily assume that your spreads are wide enough? Maybe you're a total muppet who is just giving liquidity away (I have seen that quite a few times)? Obviously, if you are able to instantaneously capture these spreads perfectly on every inquiry, this doesn't apply, but I have yet to see such a miracle. I should probably be somewhat hopeful that you aren't a muppet, given I probably hired you in the first place. However, we all make mistakes. It's a lot safer to assume zero and avoid disappointment.

Let's be more concrete: Say my Turnover is 500 bln per year on a 1bp bid ask spread. I Hedge x% of this which implies that I pay away Spreads. So how would you (or the other people around here) set my PL target?cheers

I am sorry, but I think I'll stick with my answer.

QuoteOriginally posted by: royalflushLet's be more concrete: Say my Turnover is 500 bln per year on a 1bp bid ask spread. I Hedge x% of this which implies that I pay away Spreads. So how would you (or the other people around here) set my PL target?cheersLook at the P&L of the guy who ran the book beforehand. Set the budget on this.

It looks like your case is that of a new line of business in the bank, ie there's no past track-record (it would otherwise be easy to set a budget).Given the premise, if I were your boss I would use a cost-based approach. I would hence expect from you to cover, at least, the cost associated to your market making activity: your salary+ the salary of people in related functions (backoffice and sales if there are any) + the cost of your desk (the pc, market connections, softwares, etc). Quick and dirty these costs would sum up to a minimum budget of 2m usd

Suppose marketing costs X to hardwire a bunch of high-latency, low-frequency idiots to your insanely wide spread. I would expect you to make > X.The width of your spread will be dictated by the limits of what marketing thinks they can sell. And the quality of their customers will be dictated by what type of activity you will be willing to trade against.If marketing brings you only scalpers whose market-data feeds are faster than yours, they cannot expect you to make any money. And if you charge spreads that are so wide that no sane person would pay them, you cannot expect them to sign up any customers.