Understanding Automated Market Making Instructions
Automated Market Making (AMM) Instructions are an advanced feature of Bullish, allowing eligible customers to directly make markets using idle assets and earn income. AMM Instructions scale to billions of dollars and income is continuously generated while the market conditions support it.
Eligible customers have the flexibility to create one or more AMM Instructions for one or more markets. Each AMM Instruction has parameters that capture the customer’s preferred trading strategy and risk profile. Such parameters include:
- A price range for bids and offers
- A minimum bid/offer spread
- Optional dynamic spread adjustments
These parameters are explained in more depth in the article on creating AMM Instructions.
Every time other market participants trade against the bids and offers sent by the AMM on your behalf, you will receive a portion of the income generated by those trades. This income derives from the Taker Fee paid by the trader and the spread you chose when you created the AMM Instruction. We collate and pay accrued income from your open AMM Instruction(s) into your spot account every hour, and also one final time when you terminate an instruction.
Since there will often be multiple AMM Instructions from multiple customers at the same price, we prorate the income generated by each trade according to the relative contribution of each AMM Instruction. Finally, the exchange itself applies an AMM fee.
Net AMM Income (per AMM Instruction, per trade) =
Gross AMM Income [of trade] x relative contribution [of AMM Instruction] x (1 - AMM fee)
- Gross AMM Income (per trade) = traded notional x (taker fee + 1/2 (fixed spread + dynamic spread))
- Traded notional is the total quote amount (e.g. BTC for BTC/USD) filled by AMM Instructions in that trade for a buy, or the total base amount (e.g. USD for BTC/USD) for a sell
Monitoring AMM Instructions
After submitting your AMM Instructions, you will not need to perform any other actions as the system is fully automated using the parameters supplied in the instruction. However, we do recommend that you regularly review your accounts. You may also terminate your AMM Instructions at any time.
Warning: Customers eligible for contributing to our AMM Instructions are subject to various requirements and risks.
Please read carefully our Risk Warnings for more information.