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In addition to earning a spread you lose from toxic trades, i.e. someone trading when your quote is stale. Alameda has a strong incentive to knowingly do bad t
by vgatherps 4y ago
In addition to earning a spread you lose from toxic trades, i.e. someone trading when your quote is stale.
Alameda has a strong incentive to knowingly do bad trades on ftx, i.e. stale quotes + spreads too small, since it increases legitimate volume numbers and generates ftx fees (gains in ftx fees offset trade loss). It's unknown if this happened or to what extent, but it can be very costly to do this in large size.
- lordnacho 4y agoYes but you can control this, turning it on and off as you like, and indeed market makers do this. It wouldn't explain a catastrophic loss though, it's more like a slow bleed that you balance against whatever income you're making.
- vgatherps 4y agoIf you're willingly doing this to boost the exchange, the whole point is that you keep it going even if it's in the red. Certainly won't catastrophically explode the maker but it doesn't help if you're already hurting somewhere else.