Tradesports may use our automated market maker to provide virtual trading liquidity to the beta contests. The market maker will post orders on both the bid and ask sides of the market, at a reasonable spread and at fair market value. This provides other traders with liquidity – they can quickly and easily match the market maker's open orders to trade in and out of positions.
An example of the market maker at work might look something like this:
You can see that there are 75 shares available on both the bid and ask sides of the market - with a 4 point spread between the bid and ask prices. These are all orders posted by the market maker. It will also post open orders at lower bid and higher ask prices as well, to provide liquidity down through the order book.
This is typically how the market maker works. By posting these orders to both sides of the market, at fair market value for each proposition in a contest, the market maker facilitates trading for everyone.
The market maker is automated and will react by adjusting its prices when its open orders are matched. But some manual intervention from Tradesports will often be needed to reprice the market at fair value when something big happens in a game. A long touchdown pass, a pick-six or a kick-off return for example. These types of events may cause the price of a proposition to swing significantly, so we will manually adjust the market maker to reflect fair market value in these cases.
It's important to note that the market maker is not eligible to win a contest. For full transparency the market maker will be shown on contest leaderboards, but it will never be declared the winner if it finishes at the top.
If you have any questions about the automated market maker, please contact us: email@example.com