Will there be a profit incentive for liquidity providers / market makers by end of June?
6
102Ṁ1037
resolved Jul 2
Resolved
NO
I think this is highly beneficial because it will cause markets to have much more liquidity than they do now, which is good for traders and prediction accuracy. (Liquidity withdrawal is another key piece, which has just been implemented: https://manifold.markets/jack/will-it-be-possible-to-withdraw-liq) Resolves YES if (in my judgement) it is reasonably feasible for someone to profit as a liquidity provider / market maker. For the purposes of this market, I'm thinking of that as someone who agrees in advance to take the other side of some set of trades (e.g. sell YES shares to a trader who wants to buy YES shares), without necessarily making a specific directional bet on the market. Some thoughts on what I intend to include under "liquidity provider / market maker": - This does not necessarily have to mean someone who provides liquidity to the current AMM system, but could also include market making via limit orders or other mechanisms. - A liquidity provider can (and I think should) be allowed to specify criteria on what types of trades they will execute, e.g. a limited price range. - For the purposes of this market, I will not consider someone who trades on spreads in the current Manifold system as a liquidity provider, because it's reactive instead of proactive - they aren't agreeing to the trades in advance, which means it doesn't work very well for providing liquidity. - One person placing limit orders betting on YES, and another person on NO, also provides liquidity much like a single person placing limit orders in both directions. But I will not consider people solely making directional bets as market makers for the purposes of this question. - I'll do my best to clarify if any questions come up. I may resolve N/A if something unexpected makes this too ambiguous. See https://manifoldmarkets.notion.site/Liquidity-solutions-compared-34c0ec79f55c41a9be573c4c88dff13e for some discussion of possible liquidity solutions. Jun 9, 11:22pm: Clarification: the term "market maker" does not mean "person who creates a market", it means someone who offers both sides in a market, which provides liquidity, and profits off of the spread. See https://www.investopedia.com/terms/m/marketmaker.asp
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