Quantifying Price Improvement in Order Flow Auctions
Fuente:
arXiv
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| Autori principali: | , , |
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| Natura: | Preprint |
| Pubblicazione: |
2024
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| _version_ | 1866916258636627968 |
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| author | Bachu, Brad Wan, Xin Moallemi, Ciamac C. |
| author_facet | Bachu, Brad Wan, Xin Moallemi, Ciamac C. |
| contents | This work introduces a framework for evaluating onchain order flow auctions (OFAs), emphasizing the metric of price improvement. Utilizing a set of open-source tools, our methodology systematically attributes price improvements to specific modifiable inputs of the system such as routing efficiency, gas optimization, and priority fee settings. When applied to leading Ethereum-based trading interfaces such as 1Inch and Uniswap, the results reveal that auction-enhanced interfaces can provide statistically significant improvements in trading outcomes, averaging 4-5 basis points in our sample. We further identify the sources of such price improvements to be added liquidity for large swaps. This research lays a foundation for future innovations in blockchain based trading platforms. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2405_00537 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Quantifying Price Improvement in Order Flow Auctions Bachu, Brad Wan, Xin Moallemi, Ciamac C. Trading and Market Microstructure This work introduces a framework for evaluating onchain order flow auctions (OFAs), emphasizing the metric of price improvement. Utilizing a set of open-source tools, our methodology systematically attributes price improvements to specific modifiable inputs of the system such as routing efficiency, gas optimization, and priority fee settings. When applied to leading Ethereum-based trading interfaces such as 1Inch and Uniswap, the results reveal that auction-enhanced interfaces can provide statistically significant improvements in trading outcomes, averaging 4-5 basis points in our sample. We further identify the sources of such price improvements to be added liquidity for large swaps. This research lays a foundation for future innovations in blockchain based trading platforms. |
| title | Quantifying Price Improvement in Order Flow Auctions |
| topic | Trading and Market Microstructure |
| url | https://arxiv.org/abs/2405.00537 |