Liquidity Provider Preferences
There are two sets of preferences that PAS participants can specify:
- general preferences: these are the acceptable high level conditions that a LP has for receiving assignments. They include: Time of week (Weekend, Weekdays), Contract type (FI_BTCUSD, FI_ETHUSD)
- risk preferences: these are the specific size constraints a liquidity provider states they are comfortable with if an assignment meets their general preferences. These are applied on the contract level. They include: Max Per Assignment Size, Max Post-Assignment Position Size, and WEEKDAYS/WEEKENDS
- directional preference: this specifies whether you want to receive assignments that are LONG or SHORT, or both LONG and SHORT.
- Note: there is NO price consideration allowed on these preferences.
- Single-collateral contract preferences are denominated in contracts. 1 contract = 1 USD
Example: as a liquidity provider you want:
Margin Account | Max Assignment | Max Position Size Post-Assignment Per Contract | Max Aggregate Positions Across All Maturities |
|---|---|---|---|
FI_BTCUSD | 500,000 USD | 2,000,000 USD NET LONG or SHORT | 8,000,000 USD NET LONG or SHORT (max position size x 4 maturities) |
FI_ETHUSD | 250,000 USD | 1,500,000 USD NET LONG or SHORT | 6,000,000 USD NET LONG or SHORT (max position size x 4 maturities) |
FI_LTCUSD | 200,000 USD | 1,000,000 USD NET LONG or SHORT | 3,000,000 USD NET LONG or SHORT (max position size x 3 maturities) |
FI_BCHUSD | 100,000 USD | 500,000 USD NET LONG OR SHORT | 1,500,000 USD NET LONG or SHORT (max position size x 3 maturities) |
FI_XRPUSD | 200,000 USD | 1,000,000 USD NET LONG or SHORT | 3,000,000 USD NET LONG or SHORT (max position size x 3 maturities) |
Note that although unwind events occur on the margin account level, these assignments apply PER CONTRACT, so the limits are applied on each ASSIGNMENT for each CONTRACT within the series for the respective margin account. For example, assume there is a liquidation on FI_BTCUSD and the Perpetual, Month contracts have unfilled liquidation of 750,000 Contracts and 800,000 Contracts, respectively. The Max Assignment will apply separately to each Contract, not the combination.
Note also that if you are long 3,000,000 Contracts on BTCUSD Perpetual then you could get short 5,000,000 Contracts worth of assignments, in sub-500,000 USD chunks, until you are max short 2,000,000 Contracts from your limit set on post-Assignment. This is not necessarily a big risk as we have many liquidity providers, but just theoretically so you understand the model.
The user could receive 500,000 from both, for total of 1,000,000 across FI_BTCUSD contracts, in two different assignments. Or if there was 4 unfilled liquidation of 4 different users that were 500,000 USD, then the liquidity provider could receive 4 of the 500,000 different assignments as their maximum is there.
Liquidity providers are NOT allowed to specify ANY price preferences in the program. Liquidity providers may ONLY be passive in the PAS, in such a way that the only preferences are about quantity to manage the limits.
Assignments always occur at best execution and are a last resort mechanism to provide an orderly market, only done after liquidation in the orderbooks fills any open orders at better prices than the 0 equity point of the undercollateralised trader.
See an example here.
Managing Preferences on the User Interface
Clients can manage their Position Assignment Program (PAS) preferences via the Assignment Program tab (Lightning Icon) on the platform.
From here, clients must agree that they understand PAS and the risks involved:
Once the client has confirmed they understand the PAS they can add new preferences. Preferences changes are limited on a per contract pair basis.
The client must choose the contract pair, whether to accept long or short positions (or both), the max size, the max position per contract after assignment and the timeframe (weekends, weekdays, all).
Active preferences will show at the top of the page, with the preference history showing below.
Clients can delete a preference if they no longer wish to take part in the PAS. This will then create a new entry in the preference history:
