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Traders Accumulate & Capture Royalties
When you place an order on LZF, 0.5% of that order is prorated to existing orders of the opposite type (Bids pay to Asks, Asks pay to Bids) based on their size and distance from the spread (Bids with "higher" prices, Asks with "lower" prices) relative to other orders in the market.
accumulate royalties
capture royalties
no discontinuities
healthy markets
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Proper Incentives In Markets
Healthy markets are comprised of orders that are large, whose prices are close to the spread, and which will remain in the order book until they eventually execute.
- Large orders that are close to the spread (Bids with "high" prices, Asks with "low" prices) accumulate the most royalties.
- Orders accumulate royalties indefinitely while in the market.
- Traders capture their orders' accumulated royalties at the time the orders execute.
- All orders are treated the same. Our algorithm has no discontinuities.
- New Bids pay royalties (commodity they have) to existing Asks (commodity they want). New Asks pay royalties (commodity they have) to existing Bids (commodity they want).
- If you retract an order, its accumulated royalties that were not already captured are redistributed using the same weighting method to all of the remaining orders of the same type in the market.
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Are We Fools In Other Markets?
By placing limit orders in traditional markets, you forfeit information for free. In some sense, it's like waving a flag that reads "hey, I'll pay this much! Please take advantage of me!"
Markets Have Not Evolved
In 1602, the Dutch East India Company created the first bid-ask market known as the Amsterdam Stock Exchange. We have used the same method in traditional markets ever since.
Modern IT & Markets
Information Technology continues to evolve at an astonishing rate. This is excellent. We can now make trades at almost the speed of light from anywhere in the world. However, since underlying market mechanics have not evolved with that technology, we now see High Frequency Trading plaguing and imbalancing markets all over Wall Street.
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The LZF Mission
We firmly believe our approach to markets is the correct one. There is one arbitrarily set value in our algorithm (royalty fee ratio) which we believe may change over time and may even need to be optimally different based on the type of markets. Ultimately, however, we see our markets being applied to commodity, currency, stock, and all other types of bid-ask markets in the future.
We hope to prove our concept by firstly applying our algorithm to Bitcoin bid-ask markets. Bitcoin does not function as a practical currency today due to its price volatility. We believe that our market algorithm is the only logically proposed solution to this problem to date.
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Smart People Are Taking Notice.
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Interesting!
Matt Levine of Bloomberg
Interesting
Jon Crowcroft of University of Cambridge
Bravo! Pure genius.
Elija Jones of HashTalk
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