Crypto Execution and Market-Making Across Fragmented Markets

Summary

The article explains crypto execution through three layers: a macro trader schedules child orders over time, a micro trader chooses order type and price, and a smart router distributes orders across exchanges. It describes market impact, thin liquidity, queue position, and the trade-off between execution certainty and slippage. The discussion argues that a local router can reduce latency and fees compared with routing through a third party, while noting that displayed liquidity may disappear or be replenished by arbitrageurs.

For market making, it considers inventory, order flow, and the order book as separate information sources. Quotes should account for inventory risk, adverse selection, order-arrival intensity, volatility, and competitors’ queue positions. Further sections discuss speed competition, price-time priority, order-book additions and cancellations as possible short-term signals, and normalizing trade prices for asymmetric maker and taker fees when constructing price indices. These are conceptual design considerations rather than a tested trading system; the document supplies no performance results, and its claims depend on market conditions and exchange mechanics.

Key ideas

• Execution algorithms can divide large orders into scheduled child orders, select how each child trades, and route it across venues.
• Crypto’s thin liquidity can make micro-level order choice important even for ordinary child-order sizes.
• Market-making quotes should reflect inventory risk, adverse selection, order flow, volatility, and competing liquidity.
• Queue priority depends on exchange matching rules and the relative cost of improving price versus waiting.
• Order-book changes and fee differences can affect short-term signals and cross-exchange price comparisons.

Tags

Cited by

• Strategies Hummingbot PMMSimpleController (by hummingbot, Apache-2.0) faithful port: 2+2-level symmetric pure market making on WLDUSDT.BINANCE 1m, 1%/2% spreads around mid, per-level triple-barrier executors (SL 3%, limit TP 2%, 45-min time limit, 1.5%/0.3% trailing stop), 5-min refresh, 15-s cooldown, 20x
• Hypotheses Hummingbot PMMSimpleController (by hummingbot, Apache-2.0) faithful port: 2+2-level symmetric pure market making on WLDUSDT.BINANCE 1m, 1%/2% spreads around mid, per-level triple-barrier executors (SL 3%, limit TP 2%, 45-min time limit, 1.5%/0.3% trailing stop), 5-min refresh, 15-s cooldown, 20x

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.