To encourage efficient trading strategies and incentivise behaviours that improve the executable liquidity of the market, BitMEX will be introducing some advanced trading rules that apply to all users of the platform. The first Trading Rule to be enabled is the Quote Fill Ratio Threshold.
We define the Quote Fill Ratio (QFR) as the proportion of quotes filled per quotes submitted to the platform per calendar day. A quote submitted is any individual order sent to the market. A quote filled is an order that has been filled for any amount. The QFR is calculated as follows:
A market maker quotes a two-sided price on XBTUSD and submits one bulk new order request containing 4 bids and 4 asks which rest in the book at different price levels. The market maker then receives a price signal and submits a bulk amend request to change the prices of the 4 bids in the market down by one tick each.
Another market participant submits a large market buy order which lifts 3 of the asks that the market maker has resting in the book. There is no more quoting or trading for these two participants for the remainder of the day.
The market maker’s QFR for the day is calculated as follows:
- # quotes filled = 3
- # quotes submitted = 12
- QFR = 3/12 = 25%
The taker’s QFR for the day is calculated as follows:
- # quotes filled = 1
- # quotes submitted = 1
- QFR = 1/1 = 100%
Accounts on the platform will need to maintain their 7 day moving average QFR above a minimum QFR threshold. Violations of this rule will result in email warnings and an eventual API ban.
Accounts making fewer than 2000 quotes per day will be exempt from this Trading Rule.
Starting 30 August 2019, the following QFR threshold will be implemented:
- Minimum QFR Threshold: 0.1% (7-day moving average)
For the introduction of this Trading Rule, the QFR threshold will initially be set very low at 0.1% to minimise impact to users. For comparison, traditional venues typically enforce QFRs in the range of 1-5%. At 0.1%, we estimate less than 0.2% of active traders will be affected based on current platform quoting activity. We may update the minimum QFR threshold and/or mechanism from time to time. Advanced notice of any changes will be published here so that users have time to adjust their trading behaviour.