How to provide liquidity for a new exchange?

[Notorius_BTC]

Hi folks,

I'm launching a new exchange and a bit stuck about providing liquidity.
I'm aware and understand technical details related with connection to a third party exchange order book.
But I want to minimise risks, losses and keep a storage in balance.

Could you suggest me links or explain how to built a proper spread and how to cover expected losses by arbitrage?

[1715346359]

1715346359

[1715346359]

1715346359

[1715346359]

1715346359

[Lucasgabd]

I'm really curious about that as well
thought that having some initial capital in the beggining and trading bots would be a way, probably not the best but maybe necessary in the start...

would really like to know more about it

[Serpens66]

There are different possibilities.
Some exchanges try to catch traders with 0% trading fees in the first x months to get liquidity. I personally prefer this, but of course it can fail if your exchange is not attractive (in sense of usability and API).
Instead of 0%, you can also make 0.1% taker and -0.1% maker -> so maker will get money for providing liquidity.

Other exchanges deal with professional liquidity providers and pay them fee.
"btcgreece" had advertisement of their liquidity provider at their website... but I can not access the website, maybe they are already gone. I think simply search google for btc exchange liquidity provider or something.

Exchange like "xbtce" simply connects to another exchange. Before btc-e went down, they had all liquidity from btc-e plus their own. Now it is any other exchange.
I think this is a complicated solution.. it might be better to ask the other exchange first, if they allow you to copy their orderbook.
And of course you need to be able to shift money between your and the other exchange easily... I do not suggest this.

"Hitbtc" has "maker contracts". I doubt anyone is market making at hitbtc, since the contract details are very hard, but the idea is still good:
https://hitbtc.com/mm

edit:
when reading your last sentence, it sounds very much like the exchange "quoine"... they also build their own "fake liquidity" with very stupid bots. I made ton of money by arbitrage with their stupid bots, but of course all trades were reverted, since they made a loss, since it was just their fake volume.
I hate this kind of liquidity and will not advise anyone to trade at such an exchange with fake liquidity.

[Notorius_BTC]

There are different possibilities.
Some exchanges try to catch traders with 0% trading fees in the first x months to get liquidity. I personally prefer this, but of course it can fail if your exchange is not attractive (in sense of usability and API).
Instead of 0%, you can also make 0.1% taker and -0.1% maker -> so maker will get money for providing liquidity.


"Hitbtc" has "maker contracts". I doubt anyone is market making at hitbtc, since the contract details are very hard, but the idea is still good:
https://hitbtc.com/mm

edit:
when reading your last sentence, it sounds very much like the exchange "quoine"... they also build their own "fake liquidity" with very stupid bots. I made ton of money by arbitrage with their stupid bots, but of course all trades were reverted, since they made a loss, since it was just their fake volume.
I hate this kind of liquidity and will not advise anyone to trade at such an exchange with fake liquidity.

Thanks. I'll check hitbtc.

I have few ideas how to keep new traders and makers on the exchange by giving them smaller fee or reward. However I need to provide initial liquidity and I'll do it via API bot. But simple copy/pasting of orderbook will entail losses on fees while I'll be trying to keep a storage in balance (I need to buy back BTC after I sold em on my exchange). So I guess I need to increase spread that I'll be able to make clearing through the parent exchange. Maybe someone already has an experience with such solution.

[BigBoy89]

Hi folks,

I'm launching a new exchange and a bit stuck about providing liquidity.
I'm aware and understand technical details related with connection to a third party exchange order book.
But I want to minimise risks, losses and keep a storage in balance.

Could you suggest me links or explain how to built a proper spread and how to cover expected losses by arbitrage?

From my experience, the best ways are:

1. Obligatory: Having an API, for market makers.
2. Highly recommended: 0% or slightly negative fees for 3-6 months.
3. Highly recommended: Willing to accept not so popular coins, listed in just 1-2 exchanges.
4. Recommended: Signature campaign or other form of targeted crypto advertisement.

[pawanjain]

Although I don't have much idea about providing liquidity, I do have some ideas through which you could get new users at your website for beginning the trading.

• 0% fee is quite obvious as a new exchange shouldn't charge its users at the beginning stage of its development
• sign up bonus can be given to new users who register at your website and deposit an initial amount
• investment scheme like yobit investbox could be added to your website so that people could invest in it (but make sure the initial investment is less as people would not want to make a huge investment in a new website)
• Keep all your charges as low as possible as it will attract new users to your exchange
• you can also try doing partnership with investors or other exchanges

[CyberKuro]

Hi folks,

I'm launching a new exchange and a bit stuck about providing liquidity.
I'm aware and understand technical details related with connection to a third party exchange order book.
But I want to minimise risks, losses and keep a storage in balance.

Could you suggest me links or explain how to built a proper spread and how to cover expected losses by arbitrage?

From my experience, the best ways are:

1. Obligatory: Having an API, for market makers.
2. Highly recommended: 0% or slightly negative fees for 3-6 months.
3. Highly recommended: Willing to accept not so popular coins, listed in just 1-2 exchanges.
4. Recommended: Signature campaign or other form of targeted crypto advertisement.

1. Everyone knows about it, without an API, people can not buy and sell at certain price.
2. I prefer Serpens66 idea; 0.1% taker and -0.1% maker or maker 0% and taker 0.3%.
3. It will be a trading platform, usually exchanges only list few most famous-tradable coins
4. Agree, any kind of advertising will make people aware of your exchanges, especially with several advantages offered.
5. Do not charge for deposit, and apply 1% fee for cash or coins withdrawal, do not take more than 1%.

[Notorius_BTC]

Hi folks,

I'm launching a new exchange and a bit stuck about providing liquidity.
I'm aware and understand technical details related with connection to a third party exchange order book.
But I want to minimise risks, losses and keep a storage in balance.

Could you suggest me links or explain how to built a proper spread and how to cover expected losses by arbitrage?

From my experience, the best ways are:

1. Obligatory: Having an API, for market makers.
2. Highly recommended: 0% or slightly negative fees for 3-6 months.
3. Highly recommended: Willing to accept not so popular coins, listed in just 1-2 exchanges.
4. Recommended: Signature campaign or other form of targeted crypto advertisement.

What experience do you have?

1. Yes, API is one of the most important things and one of the first feature we're going implement.
2. As for the fees I prefer the solution suggested above - negative for takers and positive for makers
3. I'm already working on the list of not popular but perspective coins. I'll be appreciated if you recommend few you are interested in
4. Also I'm planning to launch affiliate program for traders

Thank for your advices.

[Notorius_BTC]

Although I don't have much idea about providing liquidity, I do have some ideas through which you could get new users at your website for beginning the trading.

• 0% fee is quite obvious as a new exchange shouldn't charge its users at the beginning stage of its development
• sign up bonus can be given to new users who register at your website and deposit an initial amount
• investment scheme like yobit investbox could be added to your website so that people could invest in it (but make sure the initial investment is less as people would not want to make a huge investment in a new website)
• Keep all your charges as low as possible as it will attract new users to your exchange
• you can also try doing partnership with investors or other exchanges

Honestly I don't trust yobit
But agree with other points. Especially sign-up bonus. It has a bit complicated mechanic for an exchange so If you have examples of good realization send me the link please.