Read on Twitter
the challenge for oracle-linked AMMs are frontrunning and backrunning: front being traders who know the next tick (have a large block to deal) first trading on the amm before dealing on a clob
back being latency arbers who see it move higher elsewhere and then take on your amm
back being latency arbers who see it move higher elsewhere and then take on your amm
flow internalisation on oracle-linked AMM have direct real world analogs: 70% of fx flow is fully internalized by global dealers bc it is benign and can be netted off vs counterbalancing flow comfortably
ofc w great comfort comes great complacency
ofc w great comfort comes great complacency
frontrunners and backrunners earned supernormal profits, so the fx mkts invented last-look, the idea that a trade can still be rejected after taker sends intention to deal, if attempting to put through sharp flow
this protects the implicit AMM of the fx mkt, the broker-dealers
this protects the implicit AMM of the fx mkt, the broker-dealers
the great fragmentation across ECNs is to solve the q of how to bifurcate flow between soft and sharp. in between, makers realized they could abuse last-look to earn supernormal profits themselves
oracle-linked AMMs need to keep costs low for soft flow and high for sharp flow
oracle-linked AMMs need to keep costs low for soft flow and high for sharp flow
those who know 3ac from its fx trading days know we were prob a top3 global producer of sharp flow in emerging market currencies. some dealers who knew how to process this flow loved us, others got run over repeatedly and even exited emfx
in my view, it is impossible to eradicate sharp flow. large takers always know more than makers bc they, in their mind's eye, see the mkt as not reflecting some truth that is evident to them
AMMs must come to terms w this reality, just as MMs on CEXs and OTC do already
AMMs must come to terms w this reality, just as MMs on CEXs and OTC do already
