🍁Market Making on Fermi DEX

Market Making on Fermi DEX has the potential for being significantly more profitable than Market Making on traditional orderbooks or AMM DEXes.

Leverage

As previously discussed, the flexibility of being able to place multiple orders with the same deposited capital, potentially allows market makers to participate in, and benefit from, a much higher number of arbitrage opportunities, as compared to advanced-locking based CLOBs. For example, say a market maker wishes to provide $2m as liquidity to perform an arbitrage trade on SOL/USDC if SOL drops below $20, and on BONK/USDC, if BONK rises above $0.0002. In status quo, the market maker would have to split up his capital across the two trades(reducing gains), or pick one potential trade to lock the full $2m - incurring cost of missed opportunity. On Fermi DEX, the trader would be able to open orders for both positions simultaneously, with a single deposit. Whichever order fills first, would JIT the deposited liquidity to execute the trade. The market maker has thus gained access to twice the potential opportunity from the same capital, than market making on traditional CLOBs. Notably, a MM could have their liquidity locked up even on other applications, while they place orders on Fermi. This makes Fermi an additive to all existing LP opportunities, instead of being a competitor.

These benefits magnify even further as we consider more trades and opportunities happening in parallel. Sophisticated traders may even open 10, 15 or more orders, looking for profitable entry positions across markets - all with the same deposited capital.

Fees

The marginal cost of creating a new trade is massively reduced on Fermi, compared to traditional orderbooks - since the JIT based liquidity abstraction system allows MMs to post far more orders for the same capital. Thus Fermi DEX would have significant market depth, and see intense competition for exploiting small market spreads. These are all signs of a healthy marketplace, and would attact traders ("takers"), due to market depth and low slippage. High volume usage would in turn increase the net fees the makers earn. We propose a simple fee structure similar to OpenBook DEX: Taker fee: 0.04% , maker rebate: 0.02%, protocol fees: 0.02%