Overview
Market makers can provide liquidity on MAOB algorithmically.
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.
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.