Solver documentation
How to become a Liquidity Provider (hedger) on Symmio
Last updated
How to become a Liquidity Provider (hedger) on Symmio
Last updated
The term "Hedger" is referred to a MarketMaker or Solver that provides Liquidity on Symmio. more information can also be found on Gitbook
Scope and Perspective: This documentation is curated from the perspective of an "example hedger" that adopts a precise 1:1 A-Book hedging strategy. This Strategy ensures that this "example hedger" remains delta neutral at every point in time, eliminating any directional exposure. This approach should be interpreted as an example and not as an absolute when interacting with the Symmio system, every MarketMaker has full control to, at any point when interacting with the core protocol, design his own hedging strategy, or not hedge at all. But the Symmio protocol is specifiically designed in a way that gives MarketMakers the time and ability to hedge their trades comfortably if they decide to do so.
Operational Context: When this "example hedger" initiates a trade on Symmio, they directly open a direct countertrade on their chosen broker platform (for instance, Binance) before filling the order onchain. A unique aspect of this strategy is its sequential nature: a trade is only filled onchain when its hedging counterpart is confirmed, and conversely, it's only closed after the hedging trade is conclusively settled.
Documentation Purpose: This liquidity provision strategy and the ensuing documentation serve as a template for what can be perceived as the lowest risk profile attainable in the hedging arena. However, a note of clarity: while this approach is streamlined and minimizes risks, we recognize it's somewhat rudimentary. Veteran market makers, armed with profound expertise, may devise intricate strategies that could potentially yield heightened profits, the Symmio system gives MarketMakers one hundred percent control over the hedging strategy they want to apply. Any segments of this documentation that could be interpreted differently should be perceived purely as guidelines. They document aims to explain how a basic strategy could be seamlessly implemented, but in no way restrict or limit the development of other strategic avenues one might pursue.
Educational Use: This Hedger documentation is crafted with a singular goal in mind: to provide a fundamental understanding of the hedger's role in the Symmio system to it's readers. (MarketMakers, Investors and everyone who is interested in becoming a Hedger himself) The Hedger documentation is educational and not a comprehensive reflection of the entire Symmio protocol. It is structured to provide an introductory grasp of what it means to be a hedger and offers a primer on how one can undertake this role.
Misconceptions: Some readers might have concluded that the Symmio system depends on MarketMakers hedging themselves, leading to assumed trust dependencies on the MarketMaker side or that user funds and hedger funds are somehow dependent on off-chain brokers or results of hedging strategies. However, this understanding needs to be revised and could lead to erroneous interpretations of the system's architecture.
Top-Down Relationship: To reiterate and clarify, the relationship between a Hedger and the Symmio protocol is top-down. That means whatever actions a hedger takes off-chain have no bearing on the on-chain events. Thus, there are no trust assumptions regarding the hedger side of things as they use off-chain systems to hedge themselves or the connection between these off-chain systems and Symmio itself.
Independent On-Chain Contracts: The Symmio contracts function independently of any off-chain actions a hedger performs. They operate exclusively within the on-chain environment and are not influenced or impacted by external actions. The Symmio system is fully isolated from any issues that may or may not arise in combination with MarketMakers and the off-chain systems, centralized exchanges, trading desks, or any other forms of hedging they use. We strongly recommend readers to familiarize themselves with these points to understand Hedger's role and its interaction with the Symmio protocol. It's essential to interpret the Hedger section in light of these clarifications to avoid misrepresentations of the Symmio protocol's actual functioning.
Within the scope of Hedger's documentation, the term "Broker" holds a specific connotation, distinct from conventional interpretations. Let’s elucidate that. When the term "Broker" is mentioned in the context of being a Hedger on Symmio, it is being referred to as a general "hedging strategy" that a MarketMaker (MM) can optionally design to hedge their Symmio trades. Importantly, it's vital to understand that our system doesn't necessitate a MarketMaker to hedge their trades. In fact, it's entirely optional. However, we've architected Symmio in such a way that if a MarketMaker decides to hedge, the system allows you to do so easily, it's entirely designed to make it simple and straightforward.
Broad Application of the Term The term "Broker" is expansive in our context. It can encompass:
Centralized Exchanges (CEX) Decentralized Exchanges (DEX) Over-The-Counter (OTC) Desks Spot holdings Any other hedging strategies, whether they exist on-chain or off-chain.
A Note on Hedging Strategies We don’t categorize or prioritize one method of hedging over another. All are viewed through the same lens, and are designed by MarketMakers themselfs to be delta neutral or not, the system is designed to offer MarketMakers the potential to optimize their efficiency infinitely. Moreover, we acknowledge that the realm of hedging is vast, with potentially limitless strategies and methods for securing a position. Thus, when you come across "Broker" in our documentation, remember that it speaks to this broad, encompassing perspective.