Automating shift


#1

With the implementation of a shift parameter, custodians now have full control over the price orders are placed at. However, a manual shift is generally unwieldy for everyday use. An automated version would be much more useful.

So how do we automate it?

Well, one way is to use more price feeds. For the cny pool that would mean taking btc/USD and dividing by btc/cny to get the adjusted cny/usd price.

Another method is to use an individual custodian’s balancing level. So if a custodian comes in with 100% sell side liquidity they will tend to apply downward pressure until they balance out again.

In all strategies, serious attention needs to be paid to the interaction between offset, shift, and tolerance.


The cost to arbitrage
[Passed] NuPond Term 5 Fixed Cost Motion
#2

So I think I’m going to go ahead and do the shift based on individual custodial funds. There are issues with that implementation, specifically that if shift>offset the custodian can enter a situation where sellers could continually make money off the custodians. Even that problem could be alleviated by use of a parametric orderbook. This concept is very portable into a structure where not all the funds are at the closest spread.