CMM Model for All

OpenWorld team invented Copy Market Makers (CMM) model for all users willing to provide liquidity, but without the market making expertise to do so in order book trading.

Through CMM model, liquidity pool would trade automatically by copying all limit orders placed on the order book as maker, which represent the aggregated strategies from active market makers and traders.

Users could choose to provide liquidity either in the general pool dynamically providing liquidity in all markets, or in market-specific pools.

Staking Incentives

Fee rebate: CMM pools enjoy market maker fee tier, and could earn transaction fee rebate by copying maker orders posted by top traders and MMs.

MM strategy profit: Since professional market makers have sophisticated strategies to accommodate market dynamics and control risk, CMM model copying their trade would deliver much better performance than mechanical AMM (with low cash efficiency) or peer-to-pool model (of high risk).

Trade-to-earn rewards: CMM pools also participate trade-to-earn program to earn OWX tokens in each epoch for LPs.

Rewards dependent on performance: OpenWorld foundation will earn the referral reward of CMM pools. If CMM pool generated negative return in the last epoch, all referral reward will be used to compensate the LPs in that pool. If CMM pool generated positive return in the last epoch, all referral reward will be used to reward active MMs participating MM Program.

CMM Model Implementation

In order to ensure cash is efficiently used while control the risk of imbalance, OpenWorld dynamically determine the copy trade size based on the fund needed for fully replication and the budget available to trade.

In order to avoid spoofing that might exploit CMM pools, copy orders from the CMM pool are placed or canceled atomically with external orders in the match engine. Through this way, orders being cancelled before fully execution will not make copy orders to be filled.

Fund Needed(FN) for Fully Replication

FN is the amount of fund needed to replicate the order book with 1:1 ratio. As market depth fluctuates over time, to be conservative, fund needed is calculated as the rolling max depth of the market which is gradually decayed.

For each market, a least fund need (LFN) is determined beforehand.

Every second, current total fund on the order book will be calculated:

Total Fund = sum(order size*order price)

For the first time of calculating FN,

FN= max(Total Fund, LFN)

After that, every second, FN is updated by:

FN=max(Total Fund, LFN, 0.9999*FN_last)

Budget Available to Trade for Market-Specific Pool

In order to control the imbalance risk, the amount could be bought or sold is limited by the current pool’s NAV and positions.

budget available to buy= NAV-current position*price

budget available to sell= NAV+ current position*price

Budget Available to Trade for the General Pool

Fund in the general pool is allocated to all markets in proportion to the FN of each market.

For each market,

budget available to buy_m= NAV*FN_m/sum(FN)-current position*price

budget available to sell_m= NAV*FN_m/sum(FN)+ current position*price

Copy Ratio

Based on fund needed for fully replication and the budget available to trade, we could calculate Copy Ratio, the fraction factor for CMM pool to copy trade all maker limit orders.

copy ratio to buy =0.5* budget available to buy/ FN

copy ratio to sell =0.5* budget available to sell/ FN

Execution Rule

For each external order placed on the order book as maker, CMM would immediately place a copy order at the same price, with the size of (copy ratio*order size) rounded to trade size unit. If the copy order size is smaller than the trade size unit, the copy order would not be placed.

If the order being copied is cancelled, the copy order will be cancelled immediately from the order book.