Fees & Market Maker Involvement

What is the Market Maker?

Throughout this user guide, we have mentioned the “market maker” in the context of different facets of the Straato Market. The “market maker” is us, the creators of the Straato Market, participating in our own Market to regulate and stimulate activity.

Why does the Straato Market require a Market Maker?

Market maker involvement is necessary to facilitate the consistent function of the Straato Market. The market maker’s primary responsibility is to provide sell-side liquidity (by selling Straato into the Market) after a reset and during periods of extremely high queue velocity. After a reset, we help to facilitate the increase of the market price back to levels at which more users are willing to sell their Straato. Without this stimulation, new cycles would have a higher propensity to stall before volume accumulates. In moments of high queue velocity, we provide liquidity to allow buyers to enter the Market.

Market “Fees”

We just described the importance of the Market Maker selling Straato back into the system, although we have not yet described how the Market Maker obtains these Straato. The Market Maker never purchases Straato in the Market, but rather obtains Straato through a market-making “fee” for traders upon joining a new trading cycle. Upon joining a new trading cycle, each trader must pay a percentage of his/her total Straato (typically, around 2%) to the Market Maker, to be used to properly manage the Market in the next cycle. For example, if I own 100 Straato, I would pay 2 Straato to the Market Maker prior to the next cycle. The market-making fee will always be assessed relatively (as a percentage) up to a maximum number of Straato to be paid (i.e. so that traders who own more Straato are not disproportionately charged). The exact percentage and maximum threshold pertaining to market-making fees can be viewed in your Dashboard, between trading cycles.

Paying the market-making fee is required to be able to trade Straato in a cycle but you are not required to enter into all Straato trading cycles. You can enter into a cycle and wait a month before entering a subsequent cycle – you will not be charged fees in the interim. In your Dashboard “Account” page, you can control whether or not you wish to “Auto Join” cycles with a simple toggle. If you have this enabled, you will be automatically entered into each cycle and the market-making fee will be applied automatically. You can disable this toggle at any time. You may also manually join a cycle after it has already started, at which point you will be charged the same market-making fee.

The market-making fee enables the Straato Market Maker to fulfill its duty of managing liquidity in the Market, without having to create new Straato assets. The Market Maker will never arbitrarily create new Straato assets, as this would cause artificial “inflation” in the market, affecting cycle peak prices. If the Market Maker determines that there are simply not enough Straato assets in the total system to support the number of active traders on the platform, additional Straato will be created and assigned proportionally to current owners, thereby eliminating this inflationary risk. Market Maker Trading Procedure The market maker will never purchase Straato, only sell Straato that it inherits through the market-making fee. Furthermore, Straato offers made by traders will always take precedence over market maker offers when listed at the same price. The market maker trades exclusively on a minute-by-minute, automated basis, with the number of Straato it sells determined by the current relative position of the reset statistic versus its bounds. As the reset statistic increases, the Market Maker increases the number of Straato it sells in a given minute, determined by an exponential function. Asset prices will be spaced out as a function of the current range of prices in the queue, in order to maximize the effect of the trades on boosting prices to adequate levels for greater liquidity balance. This Market Maker trading system was created specifically to provide sell-side liquidity necessary for the optimal function of the Market. We do not actively trade against users or attempt to create profit-maximizing strategies.