Spread, depth and uptime: reading your market-making KPIs
Almost every market-making contract and exchange requirement comes down to three numbers: spread, depth and uptime. Here is what each one means, how it is measured, and what to look for in a report.
Spread
The spread is the gap between the best bid and the best ask, usually expressed as a percentage of the mid price or in basis points (one basis point is 0.01%). A token with a best bid of $0.9990 and best ask of $1.0010 has a spread of 0.20%, or 20 basis points.
A tight spread means traders lose little to the round trip of buying and selling. Exchanges typically set a maximum spread for each listing, and longer-tail tokens are usually allowed a wider one than majors.
What to check
- Is it a time-weighted average, or a snapshot taken at a good moment?
- Is it reported per venue, or blended in a way that hides a weak venue?
Depth
Depth is the value of orders resting within a band around the mid price, commonly ±2%. It tells you how much someone can buy or sell before the price moves by that amount. Depth is usually reported per side, bid and ask, as well as in total.
Spread and depth work together. A tight spread with almost nothing behind it looks good on a screenshot but fails the first real order.
Uptime
Uptime is the share of time the market meets the spread and depth targets together. A market maker can hit excellent averages while disappearing for hours at a time. Uptime catches that.
Reading a report
- Check each KPI per pair and per venue, against the target in your contract.
- Look at the worst periods, not only the averages. Volatile hours are when liquidity matters most.
- Ask what changed when a number moved, and expect a clear answer.
At Celsyn every client gets these numbers in a dashboard, and a walkthrough of what we are doing to improve them.