🌀Example Solver Order Flow
Last updated
Last updated
Solvers, or market makers, are the backbone of the IntentX platform, ensuring that trades are executed smoothly and efficiently.
Their role, while more complex, is pivotal in ensuring traders get the best possible outcomes. In this section, we’ll unravel the steps a solver takes, highlighting the depth of their involvement and the sophistication of their operations.
Note: The below is just an example of how a solver can hedge off-chain. The system is designed for maximum flexibility and solvers can operate with nearly infinite degrees of freedom.
The solver starts by depositing their collateral at on- and off-chain venues. Specifically, they deposit 50% of their desired collateral in the execution engine’s on-chain contracts and the remaining 50% at the off-chain hedging venue(s) of choice.
Note: These off-chain hedging venues can include, but are not limited to, centralized futures exchanges, OTC trading desks, other.
Solvers can now set up their market making software, checking they can:
Query/return data and execute trades using off-chain hedging venue(s).
Interact with the on-chain execution engine contracts.
Stream quotes to the IntentX front-end via WebSockets and APIs.
Solvers stream price quotes directly to the IntentX front-end using pricing data obtained from their desired hedging venue(s). Price feeds are looped constantly to provide the most accurate data and quotes are streamed to the IntentX front-end at a desired spread (+/- Xbps vs. order book price feed sensed off-chain).
As mentioned in the Trading Tutorials section of our documentation, a trader on the IntentX front-end inputs their intent to trade (size, order type, leverage) and, in return, are streamed pricing quotes from solvers in real-time. IntentX’s proprietary matching system always provides traders with the best quote per their intent to trade.
If they accept the quote, the trader submits a “request for trade” and deposits their required margin with the on-chain execution engine through a signature.
As mentioned in step 4, the “request for trade” is submitted on-chain to the solver. The solver can then pro-actively hedge the trader’s intended position off-chain at their desired hedging venue(s). This is done preemptively to allow the solver to be completely delta-neutral for their future on-chain position.
The solver then fills the trade request and deposits their required margin in the on-chain perpetual contract with a signature.
The trade is now open.
Note: The solver is not required to hedge, they can take directional risk should they choose or hedge in other methods such as spot holdings. This simply describes an example scenario.
Both the trader (on-chain) and the solver (on- and off-chain) must rebalance their collateral to maintain the required margin. If they do not, they will be liquidated by a third party.
As mentioned in the Trading Tutorials section of our documentation the trader must monitor and rebalance their on-chain cross-margin account to maintain the required collateral, or they will be liquidated. They can also “request to close” the position and obtain their collateral back +/- any PnL.
The solver must maintain both their on- and off-chain margin. In the event the trader requests to close their position, the solver can preemptively close their off-chain position (remaining delta-neutral), and then accept the on-chain request to close by trader.
Third party liquidators continuously monitor the margin of open positions using oracle price feeds. Both traders and solvers can be liquidated if their margin balances drop below the requirement.
The efficiencies of the intents-based system lies in its seamless orchestration between on-chain and off-chain activities, catering to both traders and solvers.
Traders:
Optimal price execution accessing off-chain liquidity on-chain
Streamlined RFQ process to provide quick fill times (<5 seconds)
Access to derivatives products that may not exist on-chain
Permissionless, self-custodial, and trustless on-chain execution
Fill large orders by multiple hedgers, who act as liquidity aggregators for efficient price discovery
Solvers:
Delta-neutral positions by re-arranging order flow to allow for proactive hedging
Flexibility to source liquidity from any locations to maximize arbitrage (CEX, DEX, OTC, Spot, CME options, etc.)
Advanced infrastructure such as netting, which allows solvers to net directional exposure amongst each other at a zero / low cost-basis (future product)
One of the key advantages of the system is it’s openness and flexibility, allowing the free market the tools to most efficiently and optimally execute derivatives trade agreements on both the trader and solver side.
