We have people on many sides of this issue. Some may be indecisive or emotional traders who get spooked and rapidly sell and buy as they change their mind. Is that manipulation? Only if they are whales? What if they put in an order and then, for some legit reason, have to cancel it as they suddenly need the money for some unforeseen expense? Is that manipulation? Only if they are whales? There are people who get spooked by cancelled orders. It makes them enter some bad position and then they cry about it. Were they cheated upon, or cheating? They were aware that any order could be cancelled, and if they made the decision to trade and it was finalized, and then the market did something they did not want, could they complain and get some “justice”? In places where these people win and manipulation is illegal, it only punishes some smaller whales while the bigger ones can do whatever they want. That’s also why we want a free, decentralized market, right? Market manipulators are already putting themselves in danger (getting spoofs unexpectedly filled, or paying feed multiple times when washing), so it is natural that they will refrain from doing so on purpose.
Instead of arguing which side is right, how about we accept the order book rules as they are and maybe improve them so people can be both more aware of what is possible and also give some real uncancelable liquidity if they want that as well? What if an exchange allowed a cancellation timer for orders? This way, anyone could set how long their order could be uncancellable for.
And this timer would be visible in the orderbook for anyone to see-for example, by color coding, instead of red and green for supply and demand, both sides could be multicolored.
There could be a gradient from bottom green highest timers up to red impending cancellaltion timers. Then a blue layer of instantly cancellable orders above it. That could give the whole transparent message and also be somewhat readable for colorblind people (actually my coloring is bad choice for them, they would definitely need a diferent colorscheme than this, such as gradient from black to yellow and spoofy blue on top). Any opened order could increase its timer, but not decrease it.
Wouldn’t this be a much better solution to the market manipulation dilemma instead of punishing small whales for trading that might or might not be manipulation and is almost impossible to prove the intent anyway? Just make the liquidity visible for everyone, and let them have the choice to signal that you are serious and reward you for it with lower fees.
We should code our DEXes this way to show the traditional market how manipulation should be tackled the right way! Orderbooks that are both completely user-choice free and market manipulation resistant (with a deterrent)! I think it’s a much better solution than banning or making manipulation illegal. Free market and full transparency FTW! We just need to make the rules better for everyone and we will not need any regulations. We could just let people trade as they want and make everything that should be transparent visible. And incentivize healthy market liquidity. Show the regualtors how it should be done the right way with a living proof of a concept by implementing this on our DEXes. Just let anyone set their own timer for how long they want their order to be uncancelable for, and make it visible to everyone. And, to force some health into the markets, encourage longer timers with lower fees. I think it’s a win-win for everyone. Also, the lower the timer, the higher the filling priority should be.
Also, the stop order book should be totally visible to all and implement this same timer mechanic as well. It’s just wrong that they are only visible to insiders.
And as for people holding coins on exchanges and not putting up orders until they time it, I don’t think anyone could or should be against that. I don’t think it’s wrong anyway and it’s not possible to do anything against that on DEXes. But at least on CEXes, there is one thing they could do-transparently tell us how many coins people hold with them that are not in the order books. I can’t see any good reason for hiding that info.
Of course, such a mechanic should also come with warnings for traders—make a popup if they accidentally fill out the timers or other fields the wrong way, that could accidentally lock their orders for a very long time. Make them confirm that they really intend to place such orders. For example, trying to put a huge order very far in the order book with a very long timer should definitely trigger such a confirmation warning to the user, so they don’t accidentally lock their coins into unfillable positions forever.
Also I think the already placed order should be allowed to move closer to the current price without reseting the timer, but not further. That would be an agreeable update to an order i suppose.
Such DEXes (or CEXes, it would be great if they implemented this as well) could report complex volume metrics, as they could separately report volume for filled blued spoofy orders and volume for filled incentivized uncancellable orders. It would jsut make a much better and more transparent and fair picture for everyone of how the martket is doing.
Another interestic mechanic would be to use some of the highest fees from filled spoofy orders to reward those orders that were both very old and set at high uncancellable timers when fiilled - those were surely the real market makers, so why not reward them with the manipulators money, and it would incentivize the real market makers even further to keep maximum timers.
IncentivizedMakerReward = SumForeachFilledOrder(Min(OrderAge, ExcCancelTimer) x Volume)
