Documentation

Market Makers

Overview

Market makers can provide liquidity on MAOB algorithmically.

Before you start

You should already know:

which market you want to make
whether you will make directly on MAOB or through a CLP vault
how you will hedge or warehouse inventory off Canonic
how often you can claim, cancel, and redeploy liquidity

Before deploying any strategy, review:

First deployment checklist

For a first production-quality maker setup:

Choose one market and one inventory policy.
Fund the maker wallet with both base and quote tokens plus gas.
Start with a small ladder so you can verify fills, claims, and cancellations operationally.
Monitor oracle freshness and taker activity before widening size.
Test your claim and redeploy loop before posting meaningful capital.

If you cannot run claims and redeploys reliably, your strategy is not operationally ready.

Choose your market and inventory mix

Pick a base token/quote token pair you can hedge or carry inventory in.
Hold both base tokens and quote tokens so you can quote on both sides.
Decide a target inventory skew (neutral, long base tokens, or long quote tokens).

Build a rung ladder

MAOB uses discrete rungs around the oracle midpoint. A typical ladder:

Places tighter liquidity near the midpoint for higher fill probability.
Places wider liquidity farther out for adverse selection protection.
Splits size across multiple rungs to smooth fills.

Suggested starting shape:

3–5 rungs per side
more size near the midpoint, less size further out
symmetric for neutral inventory, skewed if you want to lean directional

Manage inventory risk

Market making on Canonic is primarily about inventory control:

If you accumulate base tokens, shift liquidity toward sells (asks) and widen buys (bids).
If you accumulate quote tokens, do the opposite.
Use external hedges or cross‑venue rebalancing if you need a tight inventory band.

Requote cadence

MAOB does not require continuous cancels, but you should still adjust:

When the oracle midpoint moves materially.
When your inventory drifts outside your target band.
When your rung distribution becomes unbalanced from fills.

Claim and recycle

Fills accumulate as claimable balances. Market makers should:

Claim regularly to keep available balances fresh.
Recycle proceeds into new rung orders to maintain depth.
Withdraw only when you need to rebalance off‑chain.

Control price impact and toxic flow

Use wider rungs for size to reduce adverse selection.
Place tighter rungs only where you are comfortable being hit.
Monitor oracle freshness; stale or jumpy oracles can lead to poor fills.

Operational checklist

Track oracle health and staleness windows.
Monitor fill rates by rung and side.
Watch wallet balances for base tokens and quote tokens drift.
Keep enough gas reserves for timely adjustments.

Direct MAOB workflow

At the contract level, the normal maker loop is:

read midpoint and depth
choose rung placements
submit addLiquidityAsk and / or addLiquidityBid
monitor fills and claimable balances
call claimOrders, claimAndRequote, or requoteFromWithdrawable
withdraw balances only when you need to rebalance externally

See Makers for the exact entrypoints and settlement behavior.

Vault‑based market making

If you operate a CLP vault, the same strategy applies, but you deploy through the operator:

The operator batches placements and claims on behalf of LPs.
You can still run a rung ladder strategy, but with shared pool inventory.
Withdrawals may force cancellations, so keep liquidity buffers available.

For CLP-specific mechanics, continue with:

Self-trade Prevention