Market depth enhancement involves strategies and mechanisms designed to increase the volume of buy and sell orders available at various price levels for a given asset. A deeper market indicates more liquidity and greater resilience to large trades, resulting in less price volatility and tighter spreads. This improvement facilitates larger transactions without significant price impact. It benefits traders by providing better execution prices and greater confidence in market stability.
Context
In cryptocurrency markets, market depth enhancement is a continuous objective, particularly for decentralized exchanges (DEXs) and less liquid digital assets. Innovations such as automated market makers (AMMs) and concentrated liquidity protocols aim to improve the availability of trading capital. Efforts also involve attracting more institutional participants and integrating diverse liquidity sources to support larger trades. The goal involves reducing slippage and improving the overall efficiency of digital asset trading venues.
The SFC's pivot from a ringfenced model to global order book integration mandates a strategic compliance update for licensed VATPs seeking enhanced market depth.
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