There are numerous factors that influence how the assignments are disbursed among liquidity providers in the PAS.
- The largest consideration is how high of an Assignment volume a liquidity provider can take. If your institution is able to take more, then you are afforded a higher share of any given Assignment.
- The magnitude of liquidity provided on the platform in general also plays a consideration. If you are more active providing liquidity then a larger Assignment share is considered
- Finally, if you are more able to receive terminations in general (i.e., keeping sufficient margin to take opportunities), this will make you a more reliable provider that gets a higher share
Below is a direct description of the process:
- Mark Price for a contract or contracts changes, valuing positions at new amount.
- Liquidation occurs on margin account level (e.g., FI_XBTUSD) when position values fall below maintenance margin requirement.
- Assignments occur on a per Contract basis (e.g., FI_XBTUSD150618).
- We refer to the unfilled liquidation for a specific contract by U
- We refer to the set of liquidity providers whose general preferences are satisfied by P
- We allocate U among P according to their risk preferences
- Repeat the following process until U has been entirely allocated or P is empty.
- If P is empty and U has not been entirely allocated, then the remainder is terminated, with corresponding drop in Open Interest
Check out an Example of how an Assignment unfolders in out system.