Incentivized timed uncancellable orders to solve market manipulation the right way

Incentivized timed uncancellable orders

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)

I can’t address every point here but it sounds like you are talking about creating an options market. There were a few of these that started up on Solana but my understanding is that the withdrawal of capital stifled their development (one of them, Mango Markets which offered perpetual futures, just got some really bad press due to a hack this week: which isn’t helping).

One Cardano project in particular, recently rebranded from “Maladex”, seems like it will have an infrastructure that could implement what you are talking about as well as a DEX with related features:

I’m not endorsing this company or saying they will fulfill whatever need you are pointing out; just that it seems that progress in this area is on the way. I think the greatest obstacle to evolution in the DEX field is that everybody wants to implement DEX behaviour with global state machines as one would on Ethereum… instead of using Cardano’s unique features to parallelise the orders & smart contracts. If Axo is able to do this as they imply in their TL;DR whitepaper then it could really be the trading platform of the future. :face_with_monocle:

I like to hear that there are already works on that. It’s sad that the Solana DEX got hacked i don’t know anythign about that but i guess it probably doesn’t even have anything to do with this mechanic anyway…? or did it? Anyway I get that such a mechanics would also need some proper though to implement correctly but I think I’m thinking some good solutions here.
Some things that should be accounted for in such mechanic such as users weirdly filling order fields. Such as orders with very high cancel timers and very deep into the orderbook sohuld definitely give at least an extra confirmation warning, the system should not allow for too loing or even possibly eternal locks for orders. So high timers should be used cautiously and have extra steps to confirm, and toop long timer might need to be blocked just in case.

Hello @Seek_Vapes

Most of the serious CEX exchanges have this features already :point_down:

Here is an example of my charts from Kraken Pro.
You can see market depth and all stop orders placed. You can even zoom in into an order book at a price fraction you want. Example you can see all stop orders for every 1 ADA or zoom in for 0.1 ADA and so on.

You can also see trade feed of filled orders. If the orders filled were posted as sell or buy order (color coded red/green)

When ever you place an order there is already a minimum time limit that everyone has where fills will have an edge over cancels.

There is a market depth chart next to the price chart showing the total volume of all stop orders vs. current price so you can get a visual macro view of how much demand/support/resistance there is at each price level.

Also, orders are separated into two groups. If you place a stop order so your trade is open on the books you get a discount on trading fees (about 40%) vs. orders that just go on the open market fill.

Also, most reputable exchanges will lock you funds during the trade, so you can’t create a market move that you can’t afford.

If you look at those charts (and zoom in/out at your trading range) you will be able to see any dynamic layering (spoofing) at any price point. If you see a large outlier you can trade against the dynamic layering by taking position into their buy/sell wall and activating their position with smaller order. This level of transparency makes fake orders a easy target to get scooped up. In high volume assets you can break into to $50 million layer sell/buy wall in a split second and the price will just bump right back up.

As for whales (as in real whales that have billions), they don’t need to spoof. They can just create any market condition they want for real. Can’t really stop people from using their own money/crypto.

Note: Lower the trading volume of the asset equals higher the chance that spoofing can be used against traders. Don’t trade on exchanges that have limited liquidity or assets that have low volume.

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