flovtec’s Market Making Solution

Frequently Asked Questions

What is Market Making anyway ?

Flovtec

A market maker or liquidity provider is a market participant that quotes both bid and ask prices for an underlying asset. In other words the market maker is willing to sell and buy the asset at any given time with a small spread (difference between sell and buy price).

You can compare the work of a market maker to a shock absorber in a car that smoothens the road, so you don't feel bumps in the street while driving.

Why do I need a Market Maker?

Flovtec

With a Market Maker your digital asset  always has a bid and ask price on the exchange. Buy and sell orders can therefore be executed at all times without major price movements occurring. Market making is a prerequisite for liquid and well-functioning markets. Almost any successful project that lists its Token on an exchange works with Market Makers for this reason.

What is liquidity?

Flovtec

Liquidity is a feature of the Token; it is an indication of how easily a Token can be traded without affecting its market price. The more liquid a Token is, the more attractive it becomes for traders and users.

What is inventory and where does it come from?

Flovtec

Inventory is the number of digital assets and denominated asset (e.g. your digital asset in ETH, BTC, or USD) that are available at all times to be put in the order book by the market maker.

The inventory will typically be provided by the issuer of the digital assets in a managed account on the exchange(s).

Do I need an account on the exchange(s)?

Flovtec

Yes, you do. On every exchange on which you want us to make markets, you need to have an account. You then grant us access to this account through a limited Power of Attorney (PoA). We connect to your account using API keys, which allow us to run our market making algorithms on the digital assets held in your account.

How can I make sure that I get the assets back?

Flovtec

One important advantage of our solution is the fact that your digital assets are always held in your account. You do not transfer them to us. We need the permission to place orders from your account, but we can not withdraw any digital assets from the account (limited Power of Attorney). You are in full control of your digital assets held on your account at all times.

How does flovtec connect to my account?

Flovtec

flovtec needs access to the account of the digital assets via API. The API keys have to be generated by you, the account owner. This process is slightly different on every exchange, but we make sure to provide proper instructions to you and facilitate the process.

Can I expect profits from Market Making?

Flovtec

The main purpose of our service rendered are to provide liquidity and price stability. Generating profits is only a secondary objective.

What are the core objectives of our Market Making Solution?

Flovtec
  • Spread: The market maker will make sure there is always a small spread between buy and ask price, typically between 50 and 100 Basis points (0.5 % to 1 %)
  • Uptime: the time, when the algorithms of the market maker are active, typically >90 % of the time.
  • Order book depth: The book depth refers to the number of price levels available  at a particular time in the book.
  • Aggregate quoting volume: We make sure there is a minimum  amount of orders always placed in the market

How much inventory do I need on my account for flovtec?

Flovtec

This depends on the liquidity goals of the token issuer. We usually recommend to allocate around 3-5% of the value of all issued tokens to Market Making, but it can be lower.

What is Wash trading and why does Flovtec NOT do it?

Flovtec

A market participant may not place, accept or execute simultaneous buy and sell orders for accounts with common beneficial ownership in the same underlying product, if the execution produces a wash result. Wash trading creates artificial market and price activity and is seen as illegal in most jurisdictions globally. We adhere to highest market standards and comply with given regulatory frameworks. Hence, we strongly condemn these techniques and won't ever participate in such activities.

What Exchanges does flovtec offer Market Making services on?

Flovtec

We have built fully automated connectivity to 120 crypto exchanges, including the Top 20 most liquid ones.

What Exchanges should I list on?

Flovtec

Depending on your requirements and our gathered experiences, we are able to support your onboarding on many different exchanges.

Is flovtec regulated?

Flovtec

flovtec is seen as a financial intermediary and is a member of the AOOS SRO (aoos.ch), a Self-Regulatory Organization supervised by the FINMA

Why do I have to go through KYC / AML?

Flovtec

flovtec is seen as financial intermediary under the Swiss Regulatory framework and hence, has to adhere to the Swiss AML act accordingly.

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