Liquidity Providers Reward Programme

Objective

The objective is to incentivise meaningful, real liquidity with maximum up-time across all products offered by PowerTrade. A Central Limit Order Book (CLOB) liquidity can be measured by a combination of factors:

• Depth of bid/ask

• Spreads (bid/ask from mid for top of the book)

• Up-time or continuous market making

• Two-way markets

• Maker volume (liquidity that is actually taken)

Incentives by Product

There are four parts which are taken into account when rewarding market-makers across the different products:

2. An up-time calculation is also part of the make up of the final rewards, so market-makers are incentivised to keep this as high as possible.

3. Finally, there are minimum requirements in terms of minimum up-time and minimum maker volume if these are not met over the epoch, the market-makers are automatically excluded from the rewards programme.

4. The rewards are then shared proportionally, taking into account all the valid scores for the epoch.

Quantities used throughout:

• BidDepth (AskDepth) measures the size/volume of the Bid (Ask).

• SprBid (SprAsk) measures the spread from the Bid(Ask) level to the Mid Level, divided by spot.

• The quantities above will be labelled with ‘i’ or ‘j’ in the equations to reference the each individual order level (i,j= 1, 2, 3, ... ).

Minimum Requirements BID:

BidDepth > min_depth_bid

SprBid < MaxSpread/Spot = max_spr_bid

SprBid= (Mid - BidLevel)/Spot

Where BidLevel is the level for the Bid.

Minimum Requirements ASK:

AskDepth > min_depth_ask

SprAsk < MaxSpread / Spot = max_spr_ask

SprAsk = (AskLevel - Mid)/Spot

Where AskLevel is the level for the Ask.

Minimum Up-Time Requirement:

Another minimum requirement to classify for the programme is that the market-maker must demonstrate a minimum 75% up-time over the epoch. By up-time it is understood that the minimum requirements on the bid/ask side are being fulfilled as described above.

Minimum Maker-Volume:

In order to classify for the programme a market-maker needs to satisfy a minimum of 0.5% of the maker volume for that period.

Options

The following parameters are applied for Options:

• max_spread_bid = 6%

• max_spread_ask = 6%

• min_up_time_over_epoch = 75%

• min_maker = 0.5%

1. Total depth over spread of two way liquidity for the epoch:

   Only the minimum is taken, which rewards equilibrium in bid/offer and rewards two-way market-making:

   All observations are summed in order to provide an intermediary step score for the market-maker:
2. Minimum up-time for the period across the various strikes/expiries:

   Rewards liquidity providers who provide most uptime liquidity over the period, with a minimum required of up-time: if less than 75% of the time per day, excluded from reward programme (see below):
3. Maker Volume:

   • min_maker = 0.5%
4. Minimum up-time is 75% over the epoch:

   This is measured as follows.

   If:

Final formula for Options Market-Maker Score:

Then, each individual market-maker score is assigned proportionally, taking into account all of the trading scores for the epoch:

Futures

The following parameters are applied for Futures:

• max_spread_bid = 6%

• max_spread_ask = 6%

• min_up_time_over_epoch = 75%

• min_maker = 0.5%

For Futures, need to calculate score for each expiry, then add up all scores:

1. Only the minimum is taken, which rewards equilibrium in bid/offer and rewards two-way market making:

   All observations are summed in order to provide an intermediary step score for the market-maker:
2. Minimum up-time for the period across the various expiries:
3. • min_maker = 0.5%

Final formula for Futures Market-Maker Score:

Then, each individual market-maker score is assigned proportionally, taking into account all of the trading scores for the epoch:

If the total liquidity rewards for Futures in PB for the epoch is $R_{futures}$, the individual market-maker reward is:

Spot

The following parameters are applied for Spot:

• max_spread_bid = 6%

• max_spread_ask = 6%

• min_up_time_over_epoch = 75%

• min_maker = 0.5%

For spot, scores are simplified even further

1. Only the minimum is taken, which rewards equilibrium in bid/offer and rewards two-way market making:
2. Minimum up-time for the period.

   Rewards liquidity providers who provide most uptime liquidity over the period, with a minimum required of up-time: if less than 75% of the time per day, excluded from reward programme (see below):
3. Maker Volume:

   • min_maker = 0.5%

Final formula for Spot Market-Maker Score:

Then, each individual market-maker score is assigned proportionally, taking into account all of the trading scores for the epoch:

Perps

The following parameters are applied for Perps:

• max_spread_bid = 6%

• max_spread_ask = 6%

• min_up_time_over_epoch = 75%

• min_maker = 0.5%

For spot, scores are simplified even further

1. Only the minimum is taken, which rewards equilibrium in bid/offer and rewards two-way market making:

   All observations are summed in order to provide an intermediary step score for the market-maker:
2. Minimum up-time for the period across the epoch.

   Rewards liquidity providers who provide most uptime liquidity over the period, with a minimum required of up-time: if less than 75% of the time per day, excluded from reward programme (see below):
3. Maker Volume:

   • min_maker = 0.5%

Final formula for Perps Market-Maker Score:

Then, each individual market-maker score is assigned proportionally, taking into account all of the trading scores for the epoch: