Market Making#

Market makers provide two-sided liquidity — they sit on both sides of the book simultaneously, earning the bid-ask spread when both sides fill. As a maker, you pay zero fee on every fill. Eligible fills also earn a maker rebate, in addition to the spread you quote.

How the spread works#

Bid @ 5400 bps | Ask @ 5600 bps
Spread = 5600 − 5400 = 200 bps (2%)

When both sides fill:

• Buy 100 shares @ 5400 bps = pay 54 USDT
• Sell 100 shares @ 5600 bps = receive 56 USDT
• Spread profit = 2 USDT before any eligible maker rebates

The shipped allocation is 50% protocol / 5% creator / 5% referral / 40% maker rebate. Eligible maker fills credit the maker's free quote balance; ineligible maker allocation and rounding dust go to protocol, as does the referral allocation without an eligible referrer. See fee constants and allocation details.

The shipped minimum resting age is 10 seconds. Book fills use the resting order timestamp; spline fills use an eligibility anchor that can reset on activation, qualifying mid-price moves or stale refreshes. Governance can retune this gate.

The resting-age governance ceiling is 3,600 seconds. The maker allocation ceiling, MAX_MAKER_REBATE_SHARE_BPS = 4000, is 40% of the collected fee. At the default 200-bps taker cap, an eligible fill's maker allocation can be 80 bps of notional before integer rounding. It is not an additional charge to the maker or a rebate on every fill regardless of age.

Rebates credit your per-market TraderLedger.quote_free, not your wallet. Use WithdrawFunds (0x09) to move free quote back to your settlement-token account, or reuse it through supported free-funds instructions. Reconcile credits with MakerRebateCredited events and the ledger; see monitoring.

Post-Only orders: always be the maker#

Use the Post-Only order type to ensure you are never the taker:

A Post-Only order never takes liquidity. The library default reject_post_only_would_cross = 1 preserves your price or rejects. Setting it to 0 permits sliding one tick beyond the best crossing complementary maker. Read the confirmed resting price when reconciling a sliding order.

The PlaceMultiplePostOnlyOrders (0x0C) instruction lets you place up to 4 bids and 4 asks atomically in one instruction. The limit is per side; eight bids are not a valid batch. Batching reduces transaction overhead.

Requoting without losing track of exposure#

There are no client order IDs and no dedicated atomic cancel-replace instruction in this source revision. Record program-assigned order IDs from confirmed events and reconcile them with the book. A transport timeout is not permission to submit a second equivalent quote.

You can compose cancellation and replacement in one Solana transaction:

1. Add the compute-budget heap request for the total new batch size. The SDK's batchPostOnlyHeapFrameBytes / computeBudgetPrefixFor helpers derive it; do not reuse a single-order heap assumption for an eight-entry batch.
2. Cancel at most six explicit IDs with CancelMultipleOrdersById (0x11).
3. Place at most four new bids and four new asks with PlaceMultiplePostOnlyOrders (0x0C).
4. Simulate the complete transaction, then sign and submit. If any instruction fails, both cancellations and new placements roll back.

Transaction composition is atomic, but it is not a stable-ID replace API: replacement orders receive new IDs and time priority. ReduceOrder (0x14) preserves priority when partially reducing an existing order at its existing price; reducing its full remaining size cancels it. A price change requires new placement.

Use self_trade_behavior = Abort when an unexpected surviving own quote should reject the update. CancelProvide, the library default, can cancel your crossed maker quote and continue. The full table is in Placing orders.

Packet size and unique account count depend on the exact account tails, funding path, and any account-creation instructions. Serialize and simulate your actual transaction; an earlier 862-byte / 22-account design example is not a universal quote-update budget or a current measured guarantee.

The maker price band#

All resting orders (Limit and Post-Only) are gated against the maker price band. IOC orders are exempt because they never rest.

Two-sided book (both bids and asks exist):
  mid = (best_bid + best_ask) / 2
  band = [max(100, mid − 1000),  min(9900, mid + 1000)]

One-sided or empty book:
  band = [100, 9900]  (static fallback)

Constants (from program/src/constants.rs):

Example with mid at 5500 bps: your order must be in [4500, 6500]. Orders outside this range are rejected with OrderPriceOutOfBand — nothing is lost, just re-quote closer to the market.

Practical impact for makers: if the mid moves while your update transaction is in flight, your new quotes may land outside the band and be rejected. Design your update loop to handle this gracefully.

Minimum resting notional#

Each resting order must meet a minimum notional value (the stablecoin amount locked). The default DEFAULT_MIN_RESTING_NOTIONAL is 2 base units (effectively dust protection for 6-decimal USDT). This prevents tiny junk orders from consuming order-book slots.

Orders below the minimum are rejected at placement. When a large order partially fills and the remaining quantity would fall below the minimum, the remainder is cancelled rather than left as a sub-minimum resting stub.

Order book capacity#

Each side of each market has a configured resting-order capacity. Current deep books support tiers from 64 to 4096 resting orders per side. A sufficiently better-priced incoming order can evict the least aggressive eligible order on a full side. Otherwise placement rejects with OrderbookFull. Expired orders at the eviction frontier must be reclaimed before competitive eviction can proceed. Your resting quote can therefore disappear through eviction as well as cancellation, expiry, or a fill. For market makers:

• Keep your resting order count below the market's configured capacity.
• Cancel stale quotes promptly to free slots.
• If you need atomic multi-order updates, use the batch post-only instruction.

Basic two-sided quoting strategy#

Example quote calculation (tick = 100 bps)#

Note that tick rounding happens after the NO-side conversion for any NO-side orders. Always verify your canonical price after rounding.

Spline quoting#

Check three preconditions before building a spline strategy on this source revision: config must enable attachment through spline_flags; the spline creator must match the market creator; and a taker must supply the required spline accounts to consume its quotes. A curve existing in an account does not by itself make that liquidity reachable by every client.

Each compiled level quotes a price offset from the published midpoint. Midpoint updates use the next sequence number and expected shape generation; a stale quote origin or expired quote age prevents use of the update/quote. Shape changes and midpoint changes are different operations. Midpoint jumps and stale refreshes can reset the maker-rebate eligibility anchor.

The default minimum commitment is 10,000,000 settlement-token base units, and actual commitment must also cover the curve's computed exposure floor. Read the live config and simulation rather than treating that default as a complete capital requirement. Current equal-price matching gives the discrete book priority over a spline. See the spline live surface and SDK spline guide for account grammar, generation, freshness, commitment, settlement, and recovery.

Multi-market cadence#

For a native series, each duration window has a new market_id; feed, duration, and creator remain part of the identity. Discover the actual created account and trading state before quoting. Calculating the next PDA does not create a market or permit orders on an uninitialized address.

Prepare enough SOL and settlement funds for the next market and its ledger seat. A seat and free-funds balance belong to one market; they do not roll over with a bot's local strategy state. Withdraw or settle the old market's funds explicitly. A spline can be attached to only one market at a time in this revision: settle/detach the previous attachment before the next window's attachment, and publish a fresh quote. Keep old market IDs in the reconciliation ledger until their orders, claims, and pending signatures are resolved.

Inventory management#

Why inventory matters#

When your bid fills, you own YES shares. When your ask fills, you've sold YES shares. Over time, imbalanced fills accumulate directional exposure — if your bids fill faster than your asks (a falling market), you build a long YES position that loses value.

Skewing quotes to reduce inventory#

Adjust your mid price based on current inventory:

inventory_skew_bps = delta_shares × skew_factor_bps_per_share
adjusted_mid = raw_mid − inventory_skew_bps

Delta exposure#

delta = yes_shares − no_shares
delta > 0 → long YES, profits if market resolves UP
delta < 0 → long NO, profits if market resolves DOWN
delta = 0 → neutral, profits from spread only

Pairs, token custody, and settlement#

MintShares converts collateral into equal YES and NO shares. Owning a pair has a fixed combined terminal payout, but selling one side creates directional exposure. WithdrawShares moves eligible internal share inventory to token custody; it is a custody operation, not a sale or an external price hedge. Track wallet tokens, position locks, and ledger balances separately so you do not count a transferred share twice.

At settlement, remaining inventory pays according to the recorded outcome; an expired neutral market uses its specified split. Normal Redeem with the position/ledger surface also drains available quote_free to the owner's settlement-token account. A zero-amount cleanup does not redeem nonzero share inventory. Reconcile both share legs and free quote, then close eligible accounts; do not assume the market timer or a cancelled order moved every balance to the wallet. See claiming and funding and free funds.

Risk management#

Time risk#

Seesaw markets have a fixed end time. Within the final minutes, a market maker's position is exposed to binary resolution risk — whatever inventory you hold settles at $0 or $1. Most strategies cancel all orders before t_end and flat out remaining inventory.

CancelAllOrders and CancelUpTo (and their free-funds variants) are atomic and bounded to 6 orders per call: if you have more than 6 resting orders in the market, the whole transaction reverts instead of cancelling a partial set. If your order count can exceed 6, build your time-based exit around explicit-ID batch cancellation (CancelMultipleOrdersById). Submit bounded batches and reconcile each confirmation. Repeating the same over-limit CancelAllOrders call cannot reduce the count because each failed call rolls back completely.

Hard limits#

Common pitfalls#

Fee economics#

Makers pay zero fee. Takers pay the capped-decay fee:

fee_bps(price) = min(200, floor(400 × (10000 − price) / 10000))

These are shipped fee defaults, not a live configuration reading. Read the current config when sizing orders.

For an equal-quantity round-trip, gross proceeds before inventory losses are:

gross_proceeds = spread_bps × quantity / 10000 + credited_maker_rebates

The only fee you pay is when you must exit a position as a taker (e.g., closing inventory before t_end). Factor the taker fee into your minimum spread when sizing exits.

Automation requirements#

Effective market making is hard to do manually. See Automation for implementation details including:

• Reading the order book via Solana RPC or WebSocket
• Building and sending PlaceMultiplePostOnlyOrders batches
• Tracking fills and adjusting quotes programmatically

Market making checklist#

Before starting

• Understand the asset and typical spread
• Set maximum inventory limits (YES and NO separately)
• Define minimum acceptable spread
• Decide on time-based exit cutoff (e.g., cancel all at t_end − 2 min)

During trading

• Monitor fills and inventory after each transaction
• Re-quote after fills using the latest book state
• Watch the price band — reject rejections gracefully
• Track unrealized inventory exposure

Before market end

• Cancel all resting orders before t_end
• Flatten remaining inventory via IOC or limit sells/buys
• Ensure no unfilled resting buy orders remain past resolution (they must be redeemed within 7 days — see Risks)
• Claim any accumulated creator fees if you also created the market

Next steps#

• Automation — running a maker programmatically with permissionless cranks and free-funds flows
• Placing Orders — all order types and parameters
• Risks — the 7-day rule and market-admin controls

Technical reference#