Variable spreads

1. Different spreads for different type of stocks,
especially for continuous or binary payoffs.
2. Adjustable spreads according to the trading volume (in cash terms), the bigger turnover stocks should have lower spreads.

These measures can provide better liquidity, trading volume increase on the same deposit limits, and more fun and bigger profits for the market maker.

Another thing: why can't have set of 10 stocks in the market maker sets (instead of current 25)? It is far more convenient for traders to calculate.

___

It is difficult to predict, especially others' predictions.



Edited 2 time(s). Last edit at 06/22/2009 11:29AM by dutching.

Dutching, thanks for this. The variable spreads idea is harder technically to do, but certainly achievable.

Anybody else like the idea of 10 shares per step for ease of calculation? Easy enough for us to do if there is demand for it.

If we reduce orders per step to 10 shares, and then increase the density of steps to compensate (meaning the market maker maximum loss is left unchanged), then the order book for a new stock initial price 50 cents would be:

Buy Orders Sell Orders
Quantity Price Quantity Price
10 0.4926 10 0.5000
10 0.4853 10 0.5074
10 0.4780 10 0.5147
10 0.4706 10 0.5220
10 0.4633 10 0.5294
10 0.4560 10 0.5367
10 0.4487 10 0.5440
10 0.4414 10 0.5513
10 0.4342 10 0.5586
10 0.4270 10 0.5658


Compare this to the order book under our current settings:

Buy Orders Sell Orders
Quantity Price Quantity Price
25 0.4833 25 0.5000
25 0.4667 25 0.5167
25 0.4502 25 0.5333
25 0.4337 25 0.5498
25 0.4174 25 0.5663
25 0.4013 25 0.5826
25 0.3854 25 0.5987
25 0.3697 25 0.6146
25 0.3543 25 0.6303
25 0.3392 25 0.6457



Edited 1 time(s). Last edit at 05/07/2009 11:40PM by admin.

It is ok to me, as 10 shares per slot is more user-friendly.

___

It is difficult to predict, especially others' predictions.

you'd have to double amount of displayed orders too to see a useful spread. e.g sometimes you want to see if someone has a large order further up or down the pipeline.

The API lets you see this:

[www.ipredict.co.nz]

Will show you the full limit book for MTA.WIN.LABOUR.

You can even type this into your browser: if it looks funny, just right click on the page and click on "View page source".

10 sounds good, be worth a try.