Author Topic: Incentivising Liquidity  (Read 4116 times)

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Offline merivercap

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Re: Incentivising Liquidity
« Reply #15 on: December 03, 2015, 08:18:57 am »
I would do #1.  It's common in traditional and bitcoin exchanges.

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Offline xeroc

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Re: Incentivising Liquidity
« Reply #16 on: December 03, 2015, 09:14:28 am »
I am also in favor of #1 simply because BTS is already too complex for many traders .. let's don't make their profit calculations worse
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Offline Empirical1.2

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Re: Incentivising Liquidity
« Reply #17 on: December 03, 2015, 09:47:42 am »
In favour of No.1

(Kraken seems to only offer 0% maker fees for very high volume, so no maker fees for every maker would be very positive.)

Not in favour of No.2

It seems complicated & commits BTS to an approach which might not work for an extended period of time.

What about a negative fee system, funded by a worker proposal applied to just one market, such as BitGold, for a limited time period to evaluate the impact it has on bootstrapping liquidity?

Example:

Define a specific range that we would like to see BitGold trading in and reward makers within that range.

We could have a set hourly budget which rolls over if it's not fully claimed thus ensuring at some point makers will be incentivised to offer liquidity in that market.

The budget could also start out small and increase depending on results. It then also gives us the option to remove it, whether it's successful/unsuccessful and also then apply it to other BitAssets having tried it on just one market at a much lower cost.

Because of BTS volatility, I also think relative orders are very important if that's possible to give people confidence to leave orders on the books.
« Last Edit: December 03, 2015, 09:51:22 am by Empirical1.2 »
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Offline botfund

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Re: Incentivising Liquidity
« Reply #18 on: December 03, 2015, 02:23:16 pm »
I think we should support percentage based trade fee and split it to maker% and taker% which can be set by committee. maker%+taker% >= 0. You can set maker% = -0.05% and taker% = 0.1%. This way maker can share fee with the network.
This is a simpler way to do the same thing.

  • NEGATIVE_MAKER_FEE = cash in the pocket of makers
  • MAKER_SHARES = more complexity and rules to accomplish the same result

I also think that liquidity would be helped by allowing orders to be placed relative to the price feed.

EDIT: Just to be clear, I'm saying that MAKER_SHARES aren't needed because a negative maker fee solves the same problem much more simply.
I really like this to be implemented and negative maker fee to improve the liquidity. I saw it worked especially near the fill price.
Regarding to the implementation, I know it's simpler if you allow both assets as fee. In this way you just match the orders like there's no fee. Then just subtract the fee from the received assets. Let's take BTS:USD as an example. If the taker is selling 10000 BTS and taker fee is 0.1% and the price is 0.05. Before fee subtract, it's 500 USD. After subtract, he gets 499.5USD and 0.5USD will be collected as fee. You'll have the same simple calculation even when maker's fee is >0, =0 or <0. That's why most exchanges use this simple rule and keep both assets as profit.
If BTA as fee is impacting the architecture, we may need the fee pool to turn it into BTS but that will be not so elegant. I think it's good to allow profit to be BTA. Anyway normally BTS and BTA fees will be likely to be similar in value.

[edit]: in the example, if maker's fee >0, it should be on BTS and USD if maker fee<0.
« Last Edit: December 03, 2015, 02:26:10 pm by botfund »

Offline lil_jay890

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Re: Incentivising Liquidity
« Reply #19 on: December 03, 2015, 04:04:33 pm »
The way market makers work in regular markets is that they are obligated to sell/buy at a certain price and usually it is a minimum of 1000 shares.

If they choose to sell 1000 shares as 25.50 they must keep those on the order books until their 1000 shares are gone.  What they will do is put a bid in just above the current bid, say at 25.46.  If someone sells them 1000 shares at their bid, they pocket the 4 cent spread because they will be immediately able to sell into their 1000 share sell order.

Why would someone do this you ask?  Why would they obligate themselves to sell at a certain price?  The reason is that they get commissions from the brokers that use them to fill their orders.  This is why if BTS has market makers, they should be compensated by the trading fees.  Hence we should use option 1.

Offline Chronos

Re: Incentivising Liquidity
« Reply #20 on: December 03, 2015, 06:16:04 pm »
Option 1 is a negative maker fee. It seems it has some community support.

Now we need specifics. How about 0.2% rebate for makers, and 0.2% fee for takers? Do you think that's too little, or too much? It makes sense to me that the maker rebate would be exactly counterbalanced by an equivalently-sized taker fee, in order to prevent abuse via self-trades.

Offline cass

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Re: Incentivising Liquidity
« Reply #21 on: December 03, 2015, 06:22:54 pm »
I am also in favor of #1 simply because BTS is already too complex for many traders .. let's don't make their profit calculations worse

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Offline Helikopterben

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Re: Incentivising Liquidity
« Reply #22 on: December 03, 2015, 11:13:09 pm »
The way market makers work in regular markets is that they are obligated to sell/buy at a certain price and usually it is a minimum of 1000 shares.

If they choose to sell 1000 shares as 25.50 they must keep those on the order books until their 1000 shares are gone.  What they will do is put a bid in just above the current bid, say at 25.46.  If someone sells them 1000 shares at their bid, they pocket the 4 cent spread because they will be immediately able to sell into their 1000 share sell order.

Why would someone do this you ask?  Why would they obligate themselves to sell at a certain price?  The reason is that they get commissions from the brokers that use them to fill their orders.  This is why if BTS has market makers, they should be compensated by the trading fees.  Hence we should use option 1.

Yes market makers in traditional markets often get rebates. 

http://www.investopedia.com/articles/active-trading/042414/what-makertaker-fees-mean-you.asp
Quote
The maker-taker plan harks back to 1997, when Island Electronic Communications Network creator Joshua Levine designed a pricing model aimed to give providers an incentive to trade in markets with narrow spreads. Under this scenario, makers would receive a $0.002/share rebate and takers would pay a $0.003/share fee, and the exchange would keep the $0.001/share difference. By the mid-2000s, rebate capture strategies had emerged as a staple of market incentive features, with payments ranging from 20 to 30 cents for every 100 shares traded.

I'm thinking give the incentive only to the short-seller-maker to reduce the premium and compensate for the added risk inherent with the short side in bitshares.

Offline Chronos

Re: Incentivising Liquidity
« Reply #23 on: December 03, 2015, 11:59:29 pm »
I'm thinking give the incentive only to the short-seller-maker to reduce the premium and compensate for the added risk inherent with the short side in bitshares.
Clever idea, but how do you identify whether a maker is also a short seller? Any short position may be unrelated to a given trade.

Offline JonnyB

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Re: Incentivising Liquidity
« Reply #24 on: December 04, 2015, 12:29:54 am »
I keep saying it and will say it again.

We need relative orders that allow orders to be placed in relation to the feed price and then move with it.
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Offline lil_jay890

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Re: Incentivising Liquidity
« Reply #25 on: December 04, 2015, 12:40:06 am »
I keep saying it and will say it again.

We need relative orders that allow orders to be placed in relation to the feed price and then move with it.

I don't think trailing orders would make that big of a difference... Plus I think those are handled by the broker in traditional markets. I don't think there is a trailing stop that can be put directly on the exchanges.

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Re: Incentivising Liquidity
« Reply #26 on: December 04, 2015, 12:40:50 am »
I keep saying it and will say it again.

We need relative orders that allow orders to be placed in relation to the feed price and then move with it.

Until then, there's metaexchange.

Offline clayop

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Re: Incentivising Liquidity
« Reply #27 on: December 04, 2015, 12:41:42 am »
Great idea... and if we ever come to have easy-to-use market maker bots built into the wallet, this could allow massive crowd-sourced liquidity.

I support this. Users can define reference feed price, relative or absolute price, tolerance, maximum iteration, and then create MM bot (or relative order).
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Offline theredpill

Re: Incentivising Liquidity
« Reply #28 on: December 04, 2015, 01:06:31 am »

http://www.investopedia.com/articles/active-trading/042414/what-makertaker-fees-mean-you.asp
Quote
The maker-taker plan harks back to 1997, when Island Electronic Communications Network creator Joshua Levine designed a pricing model aimed to give providers an incentive to trade in markets with narrow spreads. Under this scenario, makers would receive a $0.002/share rebate and takers would pay a $0.003/share fee, and the exchange would keep the $0.001/share difference. By the mid-2000s, rebate capture strategies had emerged as a staple of market incentive features, with payments ranging from 20 to 30 cents for every 100 shares traded.

I'm thinking give the incentive only to the short-seller-maker to reduce the premium and compensate for the added risk inherent with the short side in bitshares.

Meanwhile we keep charging 40 BTS for borrow and update collateral... That's odd.

Offline theredpill

Re: Incentivising Liquidity
« Reply #29 on: December 04, 2015, 01:10:34 am »
I think the first step is to not charge nothing (except anti-spam prevention) for operations that locks up money in the system, like borrow, vesting or making our order book.