A Brief Introduction Liquidity Provider
Posted By : Rohan Dodeja | 31-Jul-2018
What is Liquidity Provider
A Liquidity Provider or market maker is an independent entity which regulates and supply the assets in the market to maintain the ethics and faith in the market. Like in case of cryptocurrency Liquidity provider supplies the crypto assets in
Need Of Liquidity Provider
When a new exchange introduce itself in the market then at that time there will be no order book of
-
Either exchange dynamically
create an order at runtime by its own. -
Or take order from the outside to make
match of that order.
In first situation when exchange is dynamically creating order at runtime then at that time exchange is losing it’s crypto assets and when the situation comes when entertaining all buy orders a huge sell
Whereas in
How It
Now taking the example of
-
Create an account in the
Binance .
-
Create auth and
secret key by which you can access their data like order book and also execute order API’S.
-
Now add balance in the wallets created for your
prefered markets.
-
Like if there is a market of BCH /
XRP , BCH / ETH or from BCH to any other then you have to buy or have to transfer BCH toBinance for order execution of cryptos, let’s say suppose you bought initially 10 - 15 bitcoin cash as after establishing market exchange is enough capable of its own executions.
Cases of Liquidity Provider
> Buy / Bid
> Sell / Ask
Case 1 (BUY order)
When an exchange has only buy orders and no orders match in sell orders then exchange has to trade of with the liquidity provider to match it’s user’s buy order now let’s say user commit an order of buying 10,000 XRP in exchange of some 0.50 BCH ( including your exchange commission ) and now exchange will try to match with sell order of
Now from
Case 2 (SELL order)
Now exchange has only Sell orders and no matching orders in Buy then exchange has to again trade of with liquidity provider for matching its sell order with its buy order, let’s say user commit an order of selling his 10,000 XRP at 0.6 BCH, our order matching engine will try to execute this trade at higher than 0.6 BCH as for us we just selling at
NOTE: When we are placing the orders at
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About Author
Rohan Dodeja
Rohan is a bright web app Lead developer and have experience on Java, J2EE, REDIS, SQL. His hobbies are gaming and Travelling.