A community run market maker, MMFund, is due to begin trading on COSS at the start of next month.
How Does the Fund Operate?
The market maker fund is seeded with an initial investment, which will be used to buy crypto assets on a small number of exchange pairs. Investors are invited to contribute to the fund via this Google form to increase the available crypto assets used for market making.
Deposits/withdrawals in and out of the fund are open from the 1st to 5th of each month.
The fund will operate a sell high, buy low strategy that will utilise the benefits of negative maker fees on COSS to help increase the value of the fund.
Deposits will be credited as USD equivalent and will follow the market. Your investment will therefore be affected by the rise and fall of the market as well as the profits made from market making operations.
The fund will charge a 10% fee on your profits at the time of withdrawal, meaning no monthly or annual fees.
Market Making Strategies
The role of a market maker is to provide liquidity on an exchange, this means providing orders on the exchange book that can meet the demand of the exchange’s users.
By matching sell orders with buy orders, it is possible to make a small profit on trades. For example, if the market maker fund sells 1 BTC for $8000, it would then match the sell order with a buy at a slightly lower price (e.g. $7,999) to maintain the spread, but also make a profit.
This strategy helps stabilise spreads. Through automation, low risk and negative maker fees, it becomes profitable to keep larger amounts of crypto assets around a coin’s spot price. This has a positive impact on user experience.
CossMMBot Strategy for Market Making on COSS
The MMFund will be using an upgraded version of the freely available CossMMBot.
The bot will run on a select number of pairs to begin with and may diversify over time. Depending on the pair, a fixed spread percentage will be maintain by the bot. Whenever a sell order is executed, a matching buy order will be placed.
This will link in with the Arbitrage bot that is managed by the same team, increasing the number of opportunities for the Arbitrage bot to make a profit.
MMFund’s Impact on COSS
The MMFund will increase the volume of trading done on the COSS exchange. This benefits all holders of the COS token, who receive a share of 50% of all fees in the FSA.
Although MMFund will reach negative maker fees, there are still taker fees being paid on every trade, which are shared with COS holders in the FSA. See this article about the new negative maker fees on COSS.
By tightening the spread and creating liquidity, the MMFund will also help COSS become a more attractive place for users to buy and sell cryptocurrencies.
If you’d like to contribute to the fund and help support liquidity on the COSS exchange, improve your FSA and take a share of the MMFund profits, you can request to invest today. Deposits for the first round are set to close on October 5th.
Read the launch announcement here: https://www.reddit.com/r/CossIO/comments/davwop/market_making_fund_launch_day/