Market making, inventory and cross-exchange hedging
Every quote is also a decision about inventory. The hedge-aware maker prices each quote from the cost of offsetting a fill on other venues.
Trading strategies
Trading strategies
Every strategy answers one question: what can we quote or trade right now, given what we hold and what we can still execute?
Where the money comes from
- Spread capture: quoting both sides of a book and earning the difference when both sides fill.
- Arbitrage: buying where an asset is cheaper and selling where it is dearer, across markets or conversion routes.
- Rebates and incentives: maker rebates on order books and BNB incentives in Binance Liquidity Swap pools.
Rebates change which trades are worth making. A maker fill that barely covers its costs still pays once the rebate is counted.
Five strategy families
| Family | Source of edge | Legs | Main constraint |
|---|---|---|---|
| Market making and hedging | Spread capture, maker rebates | One quoted book, optional hedge | The inventory a fill creates |
| Spot and Liquidity Swap arbitrage | Spot/pool price gap plus BNB incentives | Spot maker, pool hedge | Pool impact and swap size limits |
| Triangular arbitrage | Maker quote against a synthetic price | Three markets | Two taker hedges after a fill |
| Statistical cross-pricing | Drifting ratio between markets | Maker, conversion rate, reference | Fresh trends and reference prices |
| Grid allocation | Rebalancing as price crosses levels | One instrument | Partial fills and price jumps |
What every strategy has to handle
- Costs: fees on every leg, rebates on maker legs, impact on pool hedges.
- Inventory: maker quotes go to zero while inventory or data is out of line.
- Stale inputs: heartbeats on every stream; strategies stop quoting on unhealthy data.
- Orders in flight: the system never commits the same funds or hedges the same exposure twice.
- Venue limits: precision, minimum notional and rate limits on every exchange.
Articles
Spot and Liquidity Swap arbitrage: rewards, impact and execution
How fees and pool impact are priced before trading, how quotes are sized by pool capacity, and how BNB rewards stay visible beside trading PnL.
Triangular arbitrage: executable cross-prices and three-leg execution
A cross-price gap has to survive bid and ask sides, three fees and three books. One passive order is priced from the cost of two taker hedges.
Statistical arbitrage with Kalman-based cross-pricing
A BTC/EUR book tracks BTC/USDT perpetual futures through EUR/USDT. A scalar Kalman trend of the price ratio, estimated separately for bid and ask, sets the quotes.
Grid trading as inventory rebalancing
Our grid sets a target split between base and quote at each level and places whichever order restores it. Partial fills and price gaps can't break its view of its own balances.