Top-of-Book Spread Capture with Limit Orders

Summary

This basic market-making approach attempts to capture the gap between the best bid and best ask. It places buy and sell orders near the top of the book, adjusting each quote by a configurable slide amount. If the spread after those adjustments falls below a minimum threshold, it cancels pending orders. It also cancels a side when the market moves away from that quote, then checks balances and holdings to size replacement orders within a per-order lot limit and minimum trade size.

The parameters cover retry and polling intervals, quote adjustment, minimum spread, order size, and minimum quantity. The source calculates and logs account-value change, but the document reports no test results or profitability evidence. The described logic does not explain how it controls inventory accumulation, adverse selection, fees, or partial fills, all of which can affect realized spread capture. Its basic rule therefore illustrates order placement and cancellation mechanics without establishing that the approach is profitable.

Key ideas

• The strategy seeks to earn the difference between top-of-book buy and sell prices.
• It cancels quotes when the adjusted spread is below a configured minimum.
• It reprices a side when the market moves away from its resting order.
• Available balance and holdings constrain buy and sell order sizes.
• The document describes order logic but gives no evidence of profitability.

Tags

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