Market Maker
MarketMaker posts symmetric limit orders on both sides of the mid-price and adjusts quotes on every book update.
Algorithm
- Compute
mid = (best_bid + best_ask) / 2. - Feed the mid price into the HMM regime filter and apply a spread multiplier based on the detected regime.
- Apply inventory skew: if long, widen the ask and tighten the bid to mean-revert.
- Place a bid at
mid - half_spreadand an ask atmid + half_spread. - On the next book update, cancel stale quotes and replace with fresh ones (peg mode reduces churn by only replacing when price moves beyond a threshold).
Parameters
| Parameter | Default | Description |
|---|---|---|
spread | dec!(0.002) | Base total spread as a fraction of mid |
order_qty | dec!(0.01) | Order size in base currency |
inventory_skew | dec!(0.5) | Multiplier for inventory-based skew |
peg_threshold | dec!(0.0005) | Min price move before requoting (peg mode) |
Regime-gated spread scaling
MarketMaker embeds an HmmFilter (two-state hidden Markov model) that classifies the market into Trending or MeanReverting based on the sign persistence of consecutive log returns.
| Regime | Spread multiplier | Rationale |
|---|---|---|
| Trending | 2.0× | Informed directional flow → widen to reduce adverse selection |
| MeanReverting | 0.75× | Noise-driven oscillation → tighten to capture more fills |
| Uncertain (< 0.60 confidence) | 1.0× | Default spread, no adjustment |
The HMM needs at least two price updates before emitting a confident regime. During warm-up the multiplier is 1.0.
Customise via RegimeConfig:
#![allow(unused)]
fn main() {
use mercury_strategy::{MarketMaker, RegimeConfig, HmmConfig};
let regime = RegimeConfig {
hmm: HmmConfig {
stay_probability: 0.95,
confidence_threshold: 0.65, // require higher confidence before scaling
..HmmConfig::default()
},
trending_spread_mult: 2.5, // even wider in strong trends
mean_revert_spread_mult: 0.80,
};
let mm = MarketMaker::new("BTCUSDT", dec!(0.002), dec!(0.01))
.with_regime_config(regime);
}Peg mode
Peg mode (enabled by default) avoids unnecessary cancel/replace cycles. A quote is only refreshed when the mid-price moves more than peg_threshold from the last quoted price. This reduces exchange fees and order rate usage.