
Tech
Designing a Market-Maker Circuit Breaker for Toxic Order Flow
The article discusses a circuit breaker for market makers to protect against adverse selection in bursts, particularly during news shocks and prediction-market sweeps. The breaker uses a combination of metrics, including VPIN, L1/L2 orderbook imbalance, and robust volume Z-score, to detect when order flow turns toxic. It then fires cancellation callbacks and signed webhooks for resting maker quotes to prevent informed traders from picking them
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